August 14, 2014 / 1:35 PM / 3 years ago

MIDEAST STOCKS-Banks lift Abu Dhabi and Egypt; Qatar rally falters

5 Min Read

* Abu Dhabi's Gulf Bank posts record close, NBAD up

* Egypt sets new six-year high

* Qatar slips from 10-week high; technicals remain upbeat

* Mesaieed Petrochemical rises 5 pct on MSCI move

* Vodafone Qatar loses steam after surge

By Matt Smith

DUBAI, Aug 14 (Reuters) - Banks lifted Abu Dhabi's share index to a near 10-week high on Thursday, while financial stocks were also the main gainers as Egypt's benchmark rose for a ninth trading day in ten.

National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB), Abu Dhabi's two largest lenders by market value, rose 2.1 and 2.8 percent respectively.

NBAD last month lifted its 2014 profit forecast as a buoyant economy and a surge in fee-based income helped it beat second-quarter expectations. FGB, which reported a 16 percent rise in quarterly profit in July, hit a record closing high of 18.60 dirhams on Thursday.

"UAE bank earnings have been good for a number of reasons that will remain in place for the rest of this year and into 2015 at least: loans are increasing, provisions have normalised and net interest margins have bottomed out," said a Dubai-based director of equity of sales, who declined to be identified under briefing rules.

It was not clear whether the banks' rises indicated the start of any extended uptrends in their shares or in the market as a whole. Trading volume in both stocks was very low on Thursday, partly because of a traditional summer lull.

Valuations suggest a modest amount of room for FGB to rise further, however. Eleven out of 14 analysts polled by Reuters have a "buy" or "strong buy" rating for FGB, with a mean price target of 19.66 dirhams.

By contrast, many analysts think NBAD is already fairly valued; seven have a "hold" rating and five a "sell".

Meanwhile, Cairo's main index rose 1.1 percent to a six-year high of 9,387 points; it is up 89 percent since the army deposed former president Mohamed Mursi in July 2013.

Commercial International Bank and investment bank EFG Hermes were the main supports, climbing 3.5 and 2.6 percent.

"There are some quality businesses in Egypt tied into macro variables of a huge, underpenetrated population, such as in banking and telecoms," said the director.

"Egypt has the backing of some of the wealthy Gulf states and is back on the right side of the U.S. too, so there's a good chance of bilateral and unilateral aid as well as greater foreign investment. All this suggests Egypt is healing itself."

Qatar Pauses

Qatar's index, which had climbed 1.8 percent in active trade to a 10-week peak on Wednesday, fell 0.1 percent on Thursday as volume shrank slightly. Its close of 13,505 points means it is still up 17.5 percent from June 30.

"Sharp moves are inevitable due to low liquidity on many of the names," said Ali Adou, portfolio manager at The National Investor. "Over the next five years, there is a good upside in Qatar. Some of the banks are attractive but you have to be very selective."

Aside from hopes that Saudi Arabia will return its ambassador to Qatar following an earlier spat over Doha's foreign policy, traders offered little explanation for the recent surge and instead turned to technical analysis.

"The market is bullish and any close over 13,650 could stretch the rally to 13,800-13,900 in the short term," said Shiv Prakash, a senior technical analyst at NBAD Securities.

"If the market struggles to push over 13,650, then we may witness mild profit-taking. The support at 13,200 will ignite buying again."

Mesaieed Petrochemical closed 5.0 percent higher after MSCI said it had added the stock to its MSCI All-Country World Index. Earlier in the day, it rose as much as its 10 percent daily limit.

Loss-making Vodafone Qatar, which jumped 7.9 percent on Wednesday, slipped 1.0 percent to 21.18 riyals on Thursday, trimming its 2014 gains to 98 percent. That surge has left the stock looking overpriced - all six analysts surveyed by Thomson Reuters rate it a "sell" or "strong sell", with a mean price target of 14.10 riyals.

"The company recently launched post-paid services, which provide higher per-subscriber revenue, and it has also increased its market share. But there's nothing in Vodafone Qatar's fundamentals that would justify such a share price increase," said Shrouk Diab, NBK Capital's assistant vice-president.

Vodafone Qatar is also benefitting from Qatar's rising population as more foreign workers move to the country to work on its massive infrastructure projects, although estimates of the extent of this increase vary.

Thursday's Highlights

Abu Dhabi

* The index rose 1.0 percent to 5,053 points.

Dubai

* The index climbed 0.2 percent to 4,813 points.

Qatar

* The index slipped 0.1 percent to 13,505 points.

Egypt

* The index climbed 1.1 percent to 9,387 points.

Saudi Arabia

* The index eased 0.1 percent to 10,588 points.

Kuwait

* The index fell 0.2 percent to 7,234 points.

Bahrain

* The index rose 0.5 percent to 1,477 points.

Oman

* The index rose 0.3 percent to 7,321 points. (Additional reporting by Nadia Saleem; Editing by Andrew Torchia)

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