MIDEAST STOCKS-UAE shares rebound on technicals; Kuwait slumps on regulatory crackdown

Thu Mar 13, 2014 10:08am EDT

Related Topics

* Dubai, Abu Dhabi bounce from technical support levels

* But valuations remain stretched

* Q1 earnings could set further direction

* Other Gulf markets mixed

* Kuwait falls after regulator suspends broker, stocks

By Nadia Saleem

DUBAI, March 13 (Reuters) - Shares in the United Arab Emirates on Thursday recovered some losses from the previous session on a technical rebound, while other regional markets were mixed after the global sentiment turned cautiously positive.

Surprisingly weak Chinese data and concerns over the Ukrainian crisis took down global equities this week. That triggered a long-awaited correction in UAE markets.

Renewed buying at chart support levels, however, helped the UAE rebound from multi-week lows. Dubai's bourse rose 1.2 percent, partly recouping losses from the past two days. Abu Dhabi's benchmark climbed 2.2 percent, snapping a five-session loss.

"It's a technical rebound after the huge sell-off but I think it will be short-lived," said Ali Adou, portfolio manager at Abu Dhabi-based The National Investor, that manages $95 million worth of assets in the region. "The correction was long overdue; low-quality names were outperforming bluechips."

Adou said valuations in the UAE were stretched and earnings growth was needed to justify current levels.

The next market catalyst will come in the form of first-quarter earnings, he said. "The UAE has strong economic fundamentals but the question is how much of that will trickle down to earnings," Adou added.

Dubai is trading at price-to-earnings ratio of 18.3 times, against Saudi Arabia's 16.1, while MSCI's emerging market index has a forward PE of 9.86 times.

Small-cap shares led the recovery on Thursday as retail traders jumped back, a sign that long-term investors are looking elsewhere.

Saudi Arabia's measure gained 0.4 percent and Cairo's benchmark index rose 0.5 percent.

KUWAIT

Kuwait's share index plunged to a six-month low as investors sold off small-cap stocks, in a move that could have been triggered by the regulator's crackdown on what it saw as speculation.

Kuwait's Capital Markets Authority said this week it had suspended one of the local brokers from opening and managing new investment portfolios for a period of four months, accusing it of trying to manipulate the market.

According to a trader in Kuwait who spoke on the condition of anonymity, the broker in question had accounted for a significant share of local retail turnover and the move made other retail investors jittery.

The regulator has also suspended trading in shares of several listed companies this month over financial losses.

Financial analyst Majdi Sabri said senior traders were not dealing shares "to send a message of protest to show there is a big problem," with the regulator, which is trying to impose strict rules for trading and corporate governance.

The Capital Markets Authority could not be reached for comment.

Last week, a Kuwaiti court fined the chairman of Al Ahli Bank 1.5 million dinars ($5.3 million) over alleged insider trading in the bank's shares.

Kuwait's market has been historically dominated by retail traders, with much of the trading concentrated in small-cap stocks which provide better opportunities for quick, short-term gains.

THURSDAY'S HIGHLIGHTS

DUBAI

* The index climbed 1.2 percent to 3,981 points.

ABU DHABI

* The index rose 2.2 percent to 4,754 points.

QATAR

* The index eased 0.05 percent to 11,343 points.

SAUDI ARABIA

* The index gained 0.4 percent to 9,386 points.

KUWAIT

* The index declined 0.7 percent to 7,455 points.

EGYPT

* The index climbed 0.5 percent to 8,140 points.

OMAN

* The index slipped 0.09 percent to 7,063 points.

BAHRAIN

* The index was flat at 1,375 points.

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