MIDEAST STOCKS-Qatar rebounds from 3-wk low as traders target mid-caps

Thu May 22, 2014 9:34am EDT

Related Topics

* Qatar rises 2.6 pct, its biggest gain since Sept

* Dubai up for 2nd day since Tuesday's 6-wk low

* Kuwait in doldrums as local day traders switch to other Gulf mkts

* Saudi remains near 6-yr high, but earnings may prove a drag

By Matt Smith

DUBAI, May 22 (Reuters) - Qatar's index ended a six-session losing streak to rebound from a three-week low on Thursday as investors bought back sold-off mid-cap stocks, while other Middle East markets were mixed.

Doha rose 2.6 percent to 13,008 points. It had slumped since May 13's all-time high, but Thursday's increase - its largest in eight months - puts it 1.3 percent below that milestone.

Vodafone Qatar and Islamic lender Masraf Al Rayan accounted for about half of all shares traded on the index. They climbed 2.9 and 3.8 percent respectively.

Qatar and Dubai, which hit a six-year high earlier this month, are the Gulf's top performing markets in 2014.

That surge led Credit Suisse to cut its rating on United Arab Emirates' markets to underweight from neutral, also reducing Qatar to neutral from overweight.

"This is more of a 3-6 month view - I still see significant long-term value, especially in the UAE," said Fahd Iqbal, head of Middle East research at the Swiss investment bank.

"But in the short term, valuations have gotten a bit expensive, especially in the UAE. Flows in the UAE were also increasingly speculative and there's anecdotal evidence of substantial leverage in the system too."

Dubai's measure rose 0.3 percent, up for a second day from Tuesday's six-week low and its smallest one-day move since May 14 as volatility declined ahead of a three-day weekend.

The benchmark has tripled since the start of 2013, while UAE corporate earnings are still bottoming out following Dubai's debt restructuring, a housing price crash and the global financial crisis.

"Forward earnings forecasts in the UAE only hit the bottom in 2012 - Qatar, Saudi and the rest of world bottomed out in 2009 - so there's still a long way to go. The quality of UAE earnings is now much better than they used to be," said Iqbal.

In Kuwait, day traders have largely abandoned local stocks to speculate on Gulf markets such as those in the UAE and Qatar, said Fouad Darwish, Global Investment House head of brokerage.

That has led to a steep drop in traded value, which Darwish estimates has fallen by about half this year, as well as the divergent performance of Kuwait's equity benchmarks.

Kuwait's broader price index fell 0.4 percent and is down 2.7 percent in 2014. The blue chip index dropped 0.9 percent, but is up 10.8 percent this year.

Retail investors typically trade small-cap stocks that have a low free float and so are easier to move, while institutions usually only target heavyweight names.

"There's been a reasonable influx of foreign institutions this year and retail investors are slowly coming back - I expect there will be a rally," said Darwish. "For the Gulf as a whole, forecasts at a macro level look favourable for improving company earnings and government spending."

The economies of the six Gulf Cooperation Council countries are forecast to grow between 3 and 6.1 percent in 2014, according to a Reuters poll of economists.

Saudi Arabia's index slipped 0.2 percent, within 0.7 percent of May 14's six-year high, but first-quarter results from banking and petrochemical companies were unimpressive and with these two sectors accounting for a large proportion of combined earnings, the main share index could come under pressure, analysts said.

THURSDAY'S HIGHLIGHTS

QATAR

* The index rose 2.6 percent to 13,008 points.

DUBAI

* The index rose 0.3 percent to 4,864 points.

KUWAIT

* The index fell 0.4 percent to 7,347 points.

SAUDI ARABIA

* The index fell 0.2 percent to 9,751 points.

ABU DHABI

* The index climbed 2 percent to 4,926 points.

EGYPT

* The index rose 1.2 percent to 8,728 points.

BAHRAIN

* The index climbed 0.5 percent to 1,459 points.

OMAN

* The index fell 0.2 percent to 6,744 points. (Editing by David French)

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