August 19, 2014 / 2:26 PM / 3 years ago

MIDEAST STOCKS-Egypt's property stocks lead Cairo rebound; Dubai up

* Egyptian property firm earnings rise, demographics positive

* SODIC shares surge 8.7 pct, Talaat Moustafa rises 5.5 pct

* Dubai up as volumes improve, but market still in doldrums

* Saudi ekes out another gain; volatility much reduced

* Newspaper report suggests tight foreign investment ceilings

By Matt Smith

DUBAI, Aug 19 (Reuters) - Egyptian property developer SODIC helped Cairo's bourse rebound on Tuesday as foreign institutions bought into the country's buoyant real estate sector.

Gulf markets were also mostly upbeat as buying demand increased slightly, but trading remained in a summer lull.

SODIC's shares surged 8.7 percent to a six-year peak of 47.30 Egyptian pounds. Last week, the firm - also called Sixth of October Development and Investment Co - posted a 14 percent rise in second-quarter profit.

The stock rose above resistance at 45.0-46.8 pounds and does not face any major hurdles until 63 pounds, according to a note from Pharos Securities. It peaked in December 2010, shortly before the revolution that ousted Hosni Mubarak, at 46.80 pounds.

"Egypt's real estate companies have reported good quarterly numbers, especially in terms of booking new sales and improving their balance sheets," said Harshjit Oza, a property and banking analyst at Naeem Brokerage in Cairo.

"This has come from strong off-plan sales and an improvement in their collection of receivables."

Other property stocks also gained. Talaat Moustafa , which posted a double-digit increase in half-year profit last week, rose 5.5 percent, while Palm Hills Development Co climbed 1.6 percent.

"Foreign flows are returning to real estate stocks, having been absent since the revolution - foreign institutional buying was the trigger for today's rally, with local investors then following suit," said Oza.

Demographic factors such as urbanisation, population growth and most importantly a trend of families moving to the outskirts of Cairo, where most new developments are located, are driving real estate demand and prices, he added.

Property is also seen as a hedge against currency devaluation and inflation.

Egypt's main index rose 0.9 percent to 9,396 points, clawing back some of Monday's 1.4 percent decline, which was its largest drop in eight weeks.

DUBAI GAINS

Dubai's index rose 0.6 percent to a two-week high and volumes reached a similar milestone, topping 200 million shares for only the fourth time this month.

Trading was concentrated in a handful of mid-cap stocks that are usually the prime targets for retail day traders chasing a quick profit, so Tuesday's gains may not indicate the start of a sustained rally.

Builder Arabtec and Union Properties accounted for nearly half of all shares changing hands, rising 0.5 and 1.4 percent respectively.

"Volumes are up slightly today, but i don't see any major short-term catalysts until the run-up to Q3 results," said Ali Adou, portfolio manager at The National Investor in Abu Dhabi.

"UAE markets are based on retail traders, who mostly follow technical analysis so you tend to see activity in stocks based purely on technical trends."

Abu Dhabi was near-flat, edging up 0.04 percent to be within a few points of a new 10-week high.

"UAE markets are trading at a premium to other emerging markets but the country has a low debt-to-GDP ratio, it's a dollar-pegged (currency) and there's large-scale government infrastructure spending so I believe that premium is justified," said Adou.

Saudi Arabia's index rose 0.1 percent to reach a new six-and-a-half year peak, though the benchmark is now essentially moving sideways in much reduced volatility. It soared 8.5 percent from July 21 to Aug. 10 after plans were announced to allow direct foreign ownership of Saudi stocks. Since then it has traded in a 135-point, or 1.3 percent, range.

"Investors got excited about Saudi opening up to foreign investors and overall this is very positive, but I think the rally has been overdone - valuations are a bit stretched," said The National Investor's Adou.

"It will bring more diversity in terms of investors, but the market is already very liquid."

The regulator is expected to announced draft rules covering the market opening, which will take place in the first half of next year, in coming days.

Major Saudi newspaper Asharq al-Awsat, quoting unnamed sources, reported on Tuesday that foreigners would face restrictions including a 20 percent ceiling on combined foreign ownership of any listed stock, and a 10 percent limit on ownership of the entire market.

If the latter rule is imposed, that could disappoint investors; foreign ownership of some other major emerging markets around the world is considerably higher.

A Saudi Capital Market Authority spokesman, contacted by telephone, said the draft rules were still in the final consultation stage in the CMA's legal department, and would be published in a few days for public consultation. He said he could not comment on the accuracy or otherwise of the Asharq al-Awsat story.

TUESDAY'S HIGHLIGHTS

EGYPT

* The index rose 0.9 percent to 9,396 points.

DUBAI

* The index climbed 0.6 percent to 4,852 points.

ABU DHABI

* The index edged up 0.04 percent to 5,053 points.

SAUDI ARABIA

* The index rose 0.1 percent to 10,660 points.

KUWAIT

* The index climbed 0.6 percent to 7,311 points.

QATAR

* The index rose 0.3 percent to 13,682 points.

OMAN

* The index slipped 0.2 percent to 7,321 points.

BAHRAIN

* The index rose 0.3 percent to 1,476 points. (Editing by Andrew Torchia)

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