Egypt's benchmark muted ahead of Morsi trial; Saudi index up

04 Nov, 2013

Egypt's benchmark rose slightly in thin trade on Sunday, a day before the trial of deposed Islamist president Mohamed Morsi begins, while other Middle East markets were also lacklustre. Egypt's index edged up 0.1 percent, taking its gains since the army ousted Morsi from power on July 3 to 24.5 percent.
Amer Group was the most active stock with 9.7 million shares changing hands as it fell 3.5 percent. Four other index stocks traded more than 2 million shares.
"The market is pretty flat - everybody is waiting for Morsi's trial tomorrow," said Mohamed Radwan, director of international sales at Pharos Securities in Cairo. "Overall, the mood is very cautious - we don't see any institutions trading, it's retail investors dominating."
Several hundred Islamists protested in some cities on Friday, responding to a call from a pro-Morsi alliance for daily protests ahead of the ousted president trial. He and 14 other senior Muslim Brotherhood figures are being tried on charges of inciting violence and could face a life sentence or the death penalty if found guilty.
However, aid from Gulf countries - Saudi Arabia, the United Arab Emirates and Kuwait have pledged more than $12 billion to Egypt - has boosted market sentiment since Morsi's fall, Radwan said, while what he described as a "stabilising security situation" was also positive for investors.
Saudi Arabian blue chips lifted the kingdom's index, which rose 0.2 percent to be within 2 percent of August 21's five-year peak as investors slowly shrugged off broadly disappointing third-quarter earnings to focus on dividends.
Saudi Basic Industries Corp (SABIC) rose 1 percent, up for a second session in three since Tuesday's three-week low. Al Rajhi Bank and Saudi Telecom Co (STC) added 0.3 and 1.8 percent respectively.
"It's all about Q3 results - most were below consensus and that has caused some market volatility," said Hesham Tuffaha, a Riyadh-based portfolio manager. This volatility will remain for a few weeks, he said, as dividend expectations shape trade.
"For most bank and petrochemical blue chips, we didn't see any solid growth in earnings, but if decent dividends are announced these should be enough to boost the market."
Lacklustre results have stretched many blue chips' valuations, Tuffaha said, mentioning a tepid performance by Al Rajhi Bank, Saudi's largest listed lender. Rajhi's shares are up 12.7 percent in 2013, yet its nine-month profit fell 1.4 percent year-on-year as operating expenses increased.
SABIC is a similar story - its shares have gained 12.3 percent this year versus a 1 percent nine-month profit rise.
Saudi's retail sector could correct. The sector's index is up 50 percent in 2013, driven "by expectations that large local consumption will boost companies' profits, but the results haven't justified this optimism," Tuffaha said.
Jarir Marketing Co rose 1.4 percent after the kingdom's largest listed retailer said it would hold a shareholder meeting on November 27 to approve increasing its share capital by 50 percent through a bonus issue.
Tuffaha predicted some petrochemical companies and STC could lead gains in the short- and medium terms in a catch-up rally. STC's shares have gained 14.7 percent this year, trailing the main benchmark's 18.5 percent rise, but the company comfortably beat estimates with a 73 percent increase in third-quarter profit as it cut costs. United Arab Emirates' markets were closed for a holiday.

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