MIDEAST STOCKS-Dubai drops as Arabtec concerns linger; FTSE impact on Qatar fades

Sun Jun 22, 2014 9:17am EDT

* Investors await more news from Dubai's Arabtec

* Trading volumes weak around Gulf

* But Kuwait small-caps recover after slump

* Other Gulf markets move little ahead of Ramadan

* Qatar blue chips rebound after hit from FTSE index changes

By Olzhas Auyezov

DUBAI, June 22 (Reuters) - Uncertainty about the future of Dubai contractor Arabtec Holding put local investors in a bearish mood on Sunday, affecting the whole market, which ended a three-day gaining streak. Most Gulf markets moved little on declining volumes.

Shares in Arabtec tumbled 9.9 percent after failing to hold on to early-session gains and were among the main drags on the Dubai benchmark, which fell 2.3 percent after going up as much as 1.0 percent shortly after the opening.

Arabtec shares have plunged 43 percent this month after one of its main shareholders, Abu Dhabi state fund Aabar Investments, reduced its stake in the firm to 18.94 percent from 21.57 percent.

The shares became more stable after Arabtec chief executive Hasan Ismaik resigned last week and an Aabar-linked executive became acting CEO, but analysts say investors are still waiting for a clear message from the fund on its strategy.

"There is a feeling that the news on Arabtec last week wasn't the final episode," said Sanyalak Manibhandu, manager of research at NBAD Securities in Abu Dhabi.

"A lot investors expect to see more newsflow from the company. And until the uncertainty around Arabtec is resolved, it might have a negative impact of on the rest of DFM (Dubai bourse)."

Property and construction stocks, which dominate the emirate's stock market, were down on Sunday. Emaar Properties fell 3.4 percent, Deyaar Development slid 2.5 percent and Union Properties fell 1.3 percent.

Shares in construction firm Drake and Scull, which surged last week on news that it would issue a convertible bond to a strategic investor, also retreated after touching an all-time high of 1.97 dirhams. They slid 3.2 percent to 1.84 dirhams.

SHORT-TERM LULL

Abu Dhabi's bourse closed flat on a mixed performance by blue chips in low volume. National Bank of Abu Dhabi and Aldar Properties fell 1.7 and 2.0 percent respectively, while First Gulf Bank rose 1.6 percent and Abu Dhabi Commercial Bank added 1.5 percent.

The Muslim holy month of Ramadan, which is traditionally a period of lower market activity, will begin next week and this may already be affecting bourses across the region.

"We always expect traded value to go down just ahead of Ramadan," Manibhandu said. "But this year Ramadan falls during second-quarter earnings announcements, so trading could pick up. People do trade during Ramadan if there is something to trade on."

Heavy fighting in Iraq is another factor deterring some investors from opening new positions. Shares in Abu Dhabi National Energy Company and Dana Gas, both of which have operations in Iraq's Kurdistan region, fell 0.9 and 1.3 percent. They have so far not announced any damage to those operations.

Mobile phone operator Zain Kuwait, which is also heavily exposed to Iraq, slipped 1.6 percent, limiting the blue-chip benchmark index's rise to 0.3 percent. The wider index, however, added 1.2 percent as small-caps continued to recover from last week's slump.

Qatar's index gained 0.05 percent as Qatar National Bank and Industries Qatar partly recovered from short-term weakness caused by changes in the FTSE frontier market index last week. Shares in QNB and Industries Qatar added 1.1 percent and 0.4 percent respectively.

In a June 20 review, FTSE removed seven stocks with a combined market capitalisation of $8.2 billion from the index and replaced them with seven stocks that have a combined capitalisation of $28.0 billion, reducing the weightings of other components, including the Qatari stocks.

Before the reshuffle, the index had a total capitalisation of $66.7 billion, implying constituents that remained in the index had their weightings reduced by about a quarter. But since very large amounts of money are not benchmarked to the FTSE frontier market index, the impact on fund flows was not large.

Shares in Egypt's Beltone Financial Holding slid 3.5 percent as the offer period started for the 20 percent stake in EFG Hermes, which a consortium including Beltone and Egyptian billionaire tycoon Naguib Sawiris seeks to buy.

The offer to buy EFG Hermes shares at 16.0 pounds will run until July 3, according to an EFG statement sent to the bourse. EFG Hermes was flat at 15.35 pounds while the Cairo index slipped 0.3 percent.

Saudi Arabia's Almarai edged down 0.2 percent after the Gulf's biggest dairy company said it would invest, together with U.S. soft drinks giant PepsiCo, at least $345 million in Egypt over the next five years.

The stock underperformed the Saudi index, which climbed 0.1 percent.

SUNDAY'S HIGHLIGHTS

DUBAI

* The index fell 2.3 percent to 4,490 points.

ABU DHABI

* The index was flat at 4,804 points.

QATAR

* The index added 0.05 percent to 12,460 points.

SAUDI ARABIA

* The index rose 0.1 percent to 9,657 points.

KUWAIT

* The index rose 1.2 percent to 7,024 points.

EGYPT

* The index slipped 0.3 percent to 8,316 points.

BAHRAIN

* The index fell 0.3 percent to 1,430 points.

OMAN

* The index rose 0.04 percent to 6,916 points. (Editing by Andrew Torchia)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.