MIDEAST STOCKS-Egypt recovers on Orascom hopes; Gulf lacklustre

Thu Mar 21, 2013 9:31am EDT

* Unconfirmed report that Orascom reaches initial tax deal

* Stock rallies 4.2 percent; could clear way for buyout

* Locals buy Egypt small-caps; foreigners are net sellers

* Banks support Dubai market; ENBD up 2.5 percent

* Doha Bank continues slide from Monday's high

By Nadia Saleem

DUBAI, March 21 (Reuters) - Egypt's bourse rose from a 14-week low on Thursday as investors bet Orascom Construction Industries might soon reach a deal with tax authorities, while Gulf markets were mixed in thin trading ahead of the weekend.

Egyptian newspaper Al Borsa quoted unnamed sources as saying the Ministry of Finance had reached an initial agreement with OCI under which the firm would pay 7 billion Egyptian pounds ($1.03 billion) of tax. There was no immediate comment from company officials.

Earlier this month, the public prosecutor barred OCI's chief executive Nassef Sawiris from travelling abroad as part of an investigation into accusations that the company had evaded about 14 billion Egyptian pounds of taxes related to the sale of subsidiary Orascom Building to France's Lafarge.

Resolving the tax dispute might clear the way for a buyout of OCI shares by its Amsterdam-listed affiliate, some investors think; authorities have delayed the progress of the offer to buy the shares at 280 pounds each as they try to pressure OCI into undertaking not to delist from Cairo.

OCI's shares rallied 4.2 percent to 240 pounds on Thursday while Cairo's benchmark index advanced 1.2 percent to 5,224 points; it is now down 11.2 percent from its high in early January.

Local and regional bargain-hunters bought small-caps, though non-Arab foreign investors remained net sellers. Talaat Mostafa climbed 2.9 percent.

"The medium-term trend of the market is still up...The recent consistent decline off 5,800 - which is a downward correction within the current medium-term uptrend - is expected to find support prior to the latest explicit bottom on the weekly chart of the EGX30 Index at 4,700," Pharos Holding Research said in a note.

DUBAI BANK

Elsewhere, banks helped Dubai's index gain 0.6 percent, though buying was not heavy as investors awaited first-quarter earnings season, which will start in mid-April. The index fell 0.3 percent this week and is up 17.7 percent year-to-date.

"Overall, I expect markets to cool down a bit, and Air Arabia and Aramex should be defensive plays," said Ali Adou, portfolio manager at The National Investor. The two stocks are seen as proxies for Dubai's buoyant tourism and services sectors.

Top bank Emirates NBD was the main support for the market, rising 2.5 percent. Lower provisioning and signs Dubai's troubled property sector is recovering will help banks, Adou said.

Abu Dhabi's measure slipped 0.8 percent, trimming 2013 gains to 13.9 percent.

Elsewhere, Qatar's benchmark advanced 0.3 percent, trading within a narrow range since hitting a two-month low in late February. Large-caps gained, with Industries Qatar up 0.9 percent.

Shares in Doha Bank dipped 1.3 percent, declining for a third session since Monday's four-week high. Its recent rally was driven by unconfirmed talk that the bank might postpone plans to raise capital through an issue of global depositary receipts.

"Doha Bank is an interesting story because the delay/cancellation of its GDRs will translate to a better return on equity," said Adou.

THURSDAY'S HIGHLIGHTS

EGYPT

* The index rose 1.2 percent to 5,224 points.

DUBAI

* The index climbed 0.6 percent to 1,910 points.

ABU DHABI

* The index declined 0.8 percent to 2,995 points.

QATAR

* The index gained 0.3 percent to 8,606 points.

KUWAIT

* The index slipped 0.2 percent to 6,816 points.

OMAN

The index eased 0.05 percent to 6,130 points.

BAHRAIN

* The index declined 0.2 percent to 1,118 points.

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