Egypt's bourse rebounded on Wednesday after several days of weakness, while many major stocks in the United Arab Emirates and Qatar extended declines following a jump that their inclusion in MSCI's emerging market index had sparked. Egyptian investors, who had been selling stocks en masse, resumed buying, lifting the Cairo index 1.9 percent.
-- Saudi Mobily extends drop
The benchmark fell 7.5 percent in two sessions after the government first announced plans for a 10 percent capital gains tax last Thursday, and had remained muted until Wednesday. "It was capitulation, the end of fighting (by local investors)," said Chamel Fahmy, vice-president for sales and trading at Egypt's HC Securities and Investment. Foreign investors continued buying during the sell-off, he said. Locals have now followed suit while foreigners have moved to the sidelines.
"What contributed to this positive turnaround is that we reached attractive valuation levels," Fahmy said, adding promises of fresh aid from some rich Gulf states also steadied the market. Saudi Arabia's King Abdullah has asked countries to attend a donor conference for Egypt, following last week's election of President Abdel Fattah al-Sisi. "Medium- to long-term, I think we definitely should be positive," Fahmy said.
Trading in investment bank EFG Hermes was suspended with its shares up 6.8 percent. The bourse said this was pending a company announcement but did not elaborate. Saudi Arabia's bourse also halted losses, adding 0.2 percent. Saudi Telecom rose 3.6 percent. The company has not made any announcements, but investors have been selling shares in rival Mobily in the last few days after it cut its second-quarter profit outlook by $90 million due to a scrapped network sharing deal.
Mobily shares fell 2.1 percent on Wednesday, bringing their overall decline following the profit cut to 8.6 percent. Bourses in the UAE and Qatar remained weak as most stocks that had shot up in recent weeks ahead of their inclusion in MSCI's emerging market index fell further. MSCI added nine companies from the UAE and 10 from Qatar to its widely used benchmark last weekend, prompting a wave of buying by global funds which track the index, while local investors had also built up positions in these stocks in anticipation of the upgrade.
But after funds' one-off purchases, the stocks began retreating as investors booked profits. Dubai's benchmark fell 1.1 percent. Emaar Properties, which slid 1 percent, and Dubai Islamic Bank, down 0.7 percent, were the main drags. Air Arabia has been one of a few stocks bucking the trend. The stock rose 0.7 percent to 1.45 dirhams and is up 9.8 percent since May 28.
On Monday, Citi upgraded Air Arabia to "buy" with a target price of 1.55 dirhams, saying the company could benefit from the UAE's strong economy and a temporary reduction of competitors' capacity due to one of Dubai International Airport's two runways being closed for refurbishment in May to July. Air Arabia uses airports in Sharjah and Ras Al Khaimah. Abu Dhabi's index fell 0.9 percent. National Bank of Abu Dhabi fell 3.8 percent, Abu Dhabi Commercial Bank was down 2.6 percent and First Gulf Bank retreated 2.1 percent.
Dana Gas added 1.1 percent even though the company said it would not comment on rumours of successful arbitration to recover money owed to it abroad which had lifted the stock. Qatar's bourse slid 0.6 percent. Masraf Al Rayan and Industries Qatar were the main drags, falling 1.5 and 1.6 percent respectively.
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