Egypt index gains in record volume, Saudi bourse underperforms peer markets

Egypt's bluechips carried the Cairo stock index to fresh eight-year highs in the heaviest trading volume on record on Thursday as foreign funds continued to flow in, while Saudi Arabia edged down in modest volumes. The Cairo bluechip index jumped 2 percent as a record 770 million shares traded hands, bringing its gains to 32 percent since the Egyptian pound was floated on November 3.
Bourse data showed foreign investors remained net buyers of Egyptian equities on Thursday to the tune of about $8 million; they have been net buyers every day since the float. "The market rally is overdone, but there has been a structural change in the economy brought about by the flotation of the currency, and this has unleashed both foreign capital inflows as well as liquidity in the equity markets, which is encouraging," said Kunal Damle, institutional sales broker at Bahrain's Securities & Investment Co.
"The stabilisation of the pound around 15.50-15.75 to the dollar is also encouraging foreign buyers to buy shares." However the general market index closed up only 0.8 percent and declining stocks outnumbered gainers by 133 to 52, showing investors' purchases were narrowly focused - a sign that the uptrend might soon stall.
Egypt Kuwait Holding jumped 9.8 percent. Earlier this week the diversified investment company, which invests primarily in fertilisers and petrochemicals, announced its third-quarter net profit came in at $12.1 million, a little more than double its profit in the prior-year period. Analysts at Naeem Brokerage said in a note: "We continue to recommend EKHO as a buy - the medium-term outlook for EKHO continues to be positive (although the next few quarters could be impacted by Egyptian pound weakness), while commodity prices have been recovering."
Abu Dhabi's main index edged up 0.04 percent as Abu Dhabi Commercial Bank added 0.7 percent, after it gained 5.8 percent on Wednesday. But Union National Bank lost 0.5 percent after jumping 12.3 percent, and Abu Dhabi Islamic Bank was flat after rising 4.7 percent. Speculation that ADCB and UNB might merge with each other, and that ADIB might merge with Al Hilal, flared again this week, although several bankers familiar with the industry in Abu Dhabi told Reuters that formal talks were not underway and the idea of any merger was still preliminary.
Dubai's main index added 1.4 percent with activity focusing on smaller shares usually traded by local speculative investors. Investment firm Shuaa Capital soared 12.2 percent. Dubai Financial Market closed 3.7 percent higher. Shares in the only listed exchange in the Gulf came under selling pressure earlier this week after index compiler MSCI said it planned to delete the stock from its standard index.
Saudi Arabia's index edged down 0.3 percent to 6,629 points, stalling near technical resistance at the July peak of 6,703 points. Volume was the lowest in a week. Some banks fell as investors booked profits; National Commercial Bank dropped 0.5 percent to 41.00 riyals, and is now roughly at par to the 42.14 riyal mean fair value of analysts polled by Reuters. The banking sub-index has soared 28 percent over the past 30 days.
The index has now gained for four straight weeks in what many analysts call a "relief rally" triggered by Saudi Arabia's successful international bond sale and the government's promise that it would soon settle its unpaid bills to the private sector. But the market is now again starting to look more expensive than the MSCI emerging market index: it is at a 2017 price-to-earnings ratio of about 14.1 times, against roughly 13 times for MSCI's index. "There are potential headwinds in the near term which justify caution," NCB Capital said in a note, citing this month's Opec meeting, the release of the government's 2017 budget in December, and fourth-quarter corporate earnings.