* Saudi banks to benefit long-term when U.S. rates rise
* But market may struggle to break 11,000 points
* Egypt near six-year high
* Suez project news still boosting some stocks
* Oman's Renaissance surges on investment in unit
By Matt Smith
DUBAI, Aug 20 Banks led Saudi Arabia's stock
index to a new six-year peak as trading volumes
increased on Wednesday, while Egypt also extended gains. But
other Gulf markets were subdued as a summer lull deepened.
The Saudi measure rose 0.5 percent to 10,716 points, its
highest finish since January 2008. Nearly 270 million shares
changed hands, a two-week high: Saudi Arabia has not suffered
the summer trading slump of neighbouring bourses.
Eight of the 10 largest stocks advanced. Riyad Bank
, which last month reported a 17 percent increase in
second-quarter profit, rose 4.5 percent. Lenders SABB
and Al Rajhi Bank climbed 3.2 and 0.3 percent
"One of the most important drivers for a re-rating of the
sector is the coming increase in U.S. interest rates," said Fahd
Iqbal, head of Middle East research at Credit Suisse. "That will
boost Saudi banks' net interest margins."
Saudi Arabia's currency is pegged to the dollar, which means
its monetary policy is expected to broadly follow U.S. policy.
U.S. rates may start rising next year as the American economy
recovers from the global financial crisis.
"A substantial proportion of Saudi banks' deposits are
interest-free Islamic deposits, so net interest margins are
strongly geared to a rising interest rate environment," said
The Saudi banking index rose 1.0 percent, taking
its 2014 gains to 27.5 percent, while the main market index is
up 25.5 percent. The main index has gained 9.9 percent since
plans were announced late last month for the market to allow
direct foreign share ownership next year.
"Saudi's market has already enjoyed a good run-up, and since
the announcement was made we haven't changed our forecasts for
the market," said Iqbal.
"Our initial expectation was for the market to be
constrained by the psychologically important 10,000 level, but
since the announcement was made to open the market I expect the
top to be around 11,000."
Meanwhile, Egypt's index rose 0.5 percent to 9,437
points. That put it within a few points of Sunday's six-year
closing high, but also 60 points below the session peak as some
traders booked profits.
"Egypt's market offers good upside and good valuations for
institutional investors," said Ali Adou, portfolio manager at
The National Investor in Abu Dhabi.
"Political stability is supporting the recovery story. There
will be corrections on the way, but those should be seen as a
good opportunity to accumulate shares."
In early July, Egypt slashed subsidies for car fuel and
natural gas, increasing their prices by more than 70 percent, a
move that prompted scattered protests but which was welcomed by
investors - the index has gained 15.6 percent since the start of
"Investors saw it as a positive step because it will help
reduce the budget deficit," said Adou. "In addition, it is a
very serious step from the government towards reforms."
Some stocks are still being propelled by the government's
announcement earlier this month that it would build a new Suez
Canal alongside the existing waterway.
ASCOM Geology and Mining Co jumped 9.6 percent on
Wednesday after its parent Qalaa Holdings, formerly
known as Citadel Capital, said ASCOM had been chosen to work on
the project. Qalaa's shares rose 0.5 percent.
Dubai's and Abu Dhabi's benchmarks rose just
0.1 and 0.03 percent respectively.
Only three stocks - Union Properties and Arabtec
in Dubai, and Aldar Properties in Abu Dhabi
- saw more than 10 million shares change hands. The Dubai pair
ended flat, while Aldar fell 1.0 percent.
In Oman, the index rose 0.3 percent despite losers
outnumbering gainers nine to seven.
Renaissance Services was the main support, surging
7.2 percent to an 11-week high after the company said its unit
Topaz Energy and Marine had secured a $75 million investment
from Standard Chartered Private Equity.
Renaissance was the most active stock, accounting for nearly
a third of all shares traded. Most other activity was in
small-cap stocks. These are usually the preserve of retail
investors, so their dominance suggests institutions are mostly
Kuwait's Al Madina for Finance and Investment Co
rose 2.3 percent. The company said it had agreed on settling a
$10 million debt to Global Investment House, with the
impact to be reflected in its fourth-quarter financial
statement. Al Madina had said in April that it hoped to sign an
agreement with creditors that could have a positive impact on
its financial statements in 2014.
* The index rose 0.5 percent to 10,716 points.
* The index rose 0.5 percent to 9,437 points.
* The index climbed 0.1 percent to 4,856 points.
* The index edged up 0.03 percent to 5,055 points.
* The index climbed 0.4 percent to 7,340 points.
* The index rose 0.3 percent to 7,340 points.
* The index was flat at 13,683 points.
* The index rose 0.1 percent to 1,477 points.
(Editing by Andrew Torchia)