DUBAI Nov 7 (Reuters) - Saudi Arabia's bourse rose to a five-year high on Thursday in a new trend which signals the return of investor confidence in blue chips, while most other regional markets also advanced.
After most Saudi banks and petrochemical firms posted third-quarter earnings that beat analysts' forecasts, investors are pricing in a continued trend for the next quarter's results.
"The market will be looking for Q4 earnings as an indicator for where to go from here," said John Sfakianakis, chief investment strategist at Saudi investment firm MASIC. "If we do see an upward move before that, it could be an exaggeration."
Sfakianakis said the market was fairly valued at this point and was likely to trade sideways for the next two weeks or until there are fresh catalysts.
The index climbed 0.9 percent to 8,263 points, its highest level since September 2008. It will have to post two consecutive gains above the previous peak of 8,223 points - hit in August this year - to confirm a breakout.
Banking shares index rose 1.1 percent and petrochemical index climbed 0.6 percent. Together, the two sectors make up 65 percent of the market's total value.
Al Rajhi Bank and Saudi Basic Industries Corp (SABIC) added 1.7 and 0.7 percent respectively.
Saudi Telecom Co surged 6.4 percent to a four-and-half-year high. The firm last month posted a surge in earnings and beat forecasts.
In Egypt, the benchmark index rose 0.7 percent to a new 33-month high.
Local sentiment was boosted the previous day because of relative calm in the streets despite the start of ousted President Mohamed Mursi's trial earlier this week.
Some investors are waiting for further clarity on political outlook but many have increased positions in hopes that things will improve. The interim government is working on a draft constitution. It's approval will be a precursor to holding parliamentary elections and restoring full civilian rule.
In Kuwait, the measure gained 0.3 percent to 7,940 points, hovering below the psychologically important 8,000 level with investors hesitant as most companies are yet to post quarterly earnings.
"The market has been resilient but people are on the sidelines because of lack of announcements," said Fouad Darwish, head of brokerage at Global Investment House. "Lately, liquidity has been an issue but we'll see an increase once the numbers are out."
The market is up 33.8 percent year-to-date, backed by improved earnings and advancement on local infrastructure projects. The earnings trend is expected to continue, Darwish said.
In Qatar, foreign institutional buying for a fourth straight session helped the index climb 0.2 percent to new 10-week high.
"Qatar has done well in the past month - regional markets are sitting at pretty substantial gains and if you were to rotate to safer bets and high dividend-yielding stocks, it would be in Qatar," said Amer Khan, fund manager, Shuaa Asset Management. "I expect that to continue going into year-end."
The Gulf state's banks, which pay among the highest dividends in the region, led gains. Qatar Commercial Bank rose 1.2 percent and Masraf Al Rayan added 0.5 percent.
Elsewhere, UAE bourses were mixed. Dubai's benchmark retreated 0.1 percent but is still up 78.7 percent year-to-date. The market hit a five-year high last week and the next expected catalyst is the announcement in late November of whether Dubai's bid to host the World Expo 2020 is successful.
* The index rose 0.9 percent to 8,263 points.
* The index climbed 0.7 percent to 6,416 points.
* The index gained 0.2 percent to 9,976 points.
* The index slipped 0.1 percent to 2,898 points.
* The index gained 0.2 percent to 3,852 points.
* The index climbed 0.3 percent to 7,940 points.
* The index advanced 0.3 percent to 6,754 points.
* The index rose 0.9 percent to 1,206 points.