Dubai bourse extends gains

Dubai's stock index rose for a third session in a row on Monday to lead Gulf market gains, while Industries Qatar shrugged off a fifth straight decline in quarterly profit as investors bet the firm's performance would improve in the second half of 2014. Dubai rose 1.7 percent to six-day closing high of 4,820 points as 196 million shares changed hands, nearly double Sunday's 13-month low of 100 million.
But that volume was still modest compared to levels that prevailed earlier this year, and it was not clear that any sustained rise of the market was starting. Construction firm Arabtec, for example, gained 3.9 percent, but there was no fresh news on the company and retail investors simply appeared to be trading the stock short-term once again. "What's happening now locally doesn't mean too much because the market is just chopping around," said Bruce Powers, technical strategist and president at WideVision in Dubai.
"Whether we continue to consolidate or rally is the big question. I think there's a higher probability that we will rally. Earnings haven't had too much of an impact." Neighbouring Abu Dhabi also rose, climbing 1.1 percent to 4,998 points.
"In Abu Dhabi the percentage moves are always lower, but it's the same pattern - on both markets we're heading into potential resistance zones," said Powers. "Will the buyers be aggressive enough to plough through those resistances? It looks like it will take some time." Dubai has support and resistance levels around 4,414 and 4,935 points, Powers said, while for Abu Dhabi these marks are at 4,817 and 5,055.
In Doha, Industries Qatar recovered from an early-session drop to end 0.8 percent higher at 171.50 riyals, rebounding from near technical support on the June low of 164 riyals despite reporting a 38 percent drop in second-quarter net profit. The conglomerate made 1.25 billion riyals ($343 million) in the three months to June 30, well short of analysts' forecasts in what was a fifth straight quarterly profit decline.
This slump is mainly due to state-owned Qatar Petroleum raising natural gas feedstock prices by more than 50 percent year-on-year, as well as a series of planned and unplanned plant shutdowns, said Allen Sandeep, director of research at Naeem Holdings in Cairo. "Historically, IQ enjoyed a big discount compared to global gas prices," said Sandeep. He added that shutdowns at IQ's fertiliser and petrochemical plants this year were more extensive than expected; these two units are the main contributors to the conglomerate's bottom line.
IQ's shares have remained resilient and are up 21.6 percent since the start of 2013. "The bet is that the second half of 2014 will be much better for IQ's fertiliser and petrochemical divisions, especially in terms of utilisation rates - people expect the plant shutdowns to come to an end," said Sandeep. "If that happens there will be a good lift to earnings, but if the shutdowns continue then we might have to downgrade our estimates and review our target price for the stock."
Naeem has a target price of 194.4 riyals per share for IQ and a "hold" rating. Elsewhere, late buying enabled Saudi Arabia's index to climb 0.2 percent to a fresh six-year high, gaining for an 11th straight day. The market has surged after Saudi authorities announced plans to allow direct foreign ownership of shares, although momentum is ebbing as many big banks and petrochemical shares - likely to be main targets for foreigners - lose steam.
Some second-tier stocks in these sectors are now attracting buyers; Nama Chemicals rose 2.0 percent as its daily trading volume more than doubled. Hospital firm Al Hammadi, which listed at an IPO price of 28 riyals in mid-July, shot up 8.9 percent to a fresh closing peak of 86.25 riyals. Its bullishness spread to other medical-related stocks, with National Medical surging 4.2 percent. In Oman, Galfar Engineering tumbled 6.7 percent after its after-tax profit for the first half of 2014 fell 60 percent to 2.02 million rials ($5.2 million). Early this year former Galfar managing director Mohammed Ali was jailed in a major bribery scandal.