Zain Saudi Arabia hit a three-week high on Monday after Kingdom Holding extended the deadline for its offer to buy a stake in the telecoms operator. Middle East markets were mixed, with investors cautious as they await further developments in Egypt. Zain Saudi climbed 2.9 percent to its highest finish since January 15. Yet traders hoping for a stake sale windfall may be disappointed.
Analysts expect Kingdom's offer to be priced at a steep discount to Zain Saudi's share price because of the operator's debts, mounting losses and stiff competition in the local telecoms sector. Kingdom surged 9.4 percent. Samba Financial Group climbed 1.3 percent and SABB added 2.7 percent, helping the banking index edge higher.
Many analysts are bullish about Saudi banks, predicting lending will rise along with government spending, but Youssef Kassantini, a Saudi-based financial analyst, warned unrest in Egypt may dampen the kingdom's banking activity. "Some investors that were going to borrow money are likely to hold off and see what happens in Egypt, especially if they are exposed to the country," said Kassantini.
Hundreds of thousands of Saudis live in Egypt, Kassantini said, and others have also invested heavily in their North African neighbour, with multibillion dollar annual trade between the two countries. The index rose 0.5 percent, trimming its losses to 1.2 percent since January 26, when protests in Egypt against President Hosni Mubarak's rule sent Saudi stocks tumbling.
Retail investors have led sellers, with institutions among the biggest buyers, indicating the latter were less worried about a potential Egypt contagion. "The market has rebounded, but we're still affected by the Egypt situation and I doubt the index will move much higher for now - trading will be sideways," added Kassantini.
Cairo protesters dug in for a long fight on Monday, pressing their demand for an overhaul of the political system and for Mubarak to resign as many Egyptians tried to resume their normal lives. Qatari Islamic bank Masraf Al Rayan climbed 3.6 percent to a 32-month high, extending gains since the central bank told commercial lenders to end their Islamic operations.
Qatar Islamic Bank and Qatar International Islamic Bank fell 0.8 and 1.8 percent respectively as investors booked profits from a Sunday surge. Conventional lenders have until December 31 to dispose of their Islamic banking operations. Doha Bank, which said it does no expect a big hit from the central bank ruling, dropped 1 percent.