Gulf Arab markets rallied on Wednesday as fears political unrest might spread from Egypt eased, while upbeat world stocks boosted regional sentiment. Dubai's index made its largest gain in 10 months, rising 3.3 percent, but trading is likely to remain volatile as speculators dominate and regional markets have yet to reclaim their early-week losses.
Emaar Properties climbed 5.8 percent and Drake & Scull added 6.1 percent. Both are active in Egypt. Dubai Islamic Bank rose 3.7 percent after Fitch Ratings gave the lender a stable outlook. "The turnaround is because we have a better reading of the political situation in Egypt," said Haissam Arabi, chief executive at Gulfmena Alternative Investments.
"(Egyptian President Hosni) Mubarak is showing signs of listening and giving in to some of the demands of the opposition - it's not all the way, but it is moving the right direction." US President Barack Obama told Mubarak on Tuesday that an orderly transition of power in Egypt "must begin now" in remarks critical of the Egyptian leader's plan to stay in office six more months.
After market hours, opponents and supporters of Egyptian President Hosni Mubarak fought in central Cairo in what appeared to be a move by the strongman to stamp out nine days of protests calling for him to quit. "Gulf investors are worried about a contagion effect from Egypt," said Shankar Kailasam, Gulf Baader Capital Markets head of asset management in Muscat. "Hopefully, Egypt should near a solution in the next couple of days - as soon as that happens, investors will come back to Gulf markets."
Nevertheless, many traders were worried about regional bank exposure to Egypt. National Bank of Abu Dhabi climbed 4.4 percent after its fourth-quarter profit surged, with investors seemingly little worried by the lender's warning that 2011 would be a "tricky" year for UAE banks. "We had some good news locally, with NBAD's strong profit growth and Fitch's rating for Dubai Islamic Bank, but we're still watching what is happening in Egypt and global markets on a day by day basis," said Samer al-Jaouni, General Manager of Middle East Financial Brokerage Co.
Strong US manufacturing data boosted demand for Saudi petrochemicals stocks, with the latter seen as a proxy for world trade, helping the kingdom's index advance for a third day in four, while global stocks hit fresh 29-month highs. Saudi Basic Industries Corp climbed 4.5 percent and Yanbu National Petrochemical Co (Yansab) rose 4.9 percent. "The markets should head back towards the levels they were at before the Egypt crisis," said Gulfmena's Arabi. "The political climate is conducive for people to re-rate the market from the exaggerated drop."