Saudi Arabia's index shed 0.6 percent on Tuesday as some investors booked profits after a three-week rally, while Egypt's bourse continued to strengthen on hopes for fresh Saudi aid and progress towards political reform. The Saudi index had been gaining steadily since the end of October, helped by renewed confidence in the petrochemical sector and a region-wide hunt for dividend yields ahead of the year-end.
-- Dubai index retreats from near chart resistance
"Today we are seeing small profit-taking activity," said Rami Sidani, head of investment at Schroders Middle East. "That was to be expected after the rally." Saudi Arabia's Capital Market Authority announced new rules on Monday which, once they take effect next July, will compel companies with accumulated losses totalling 50 percent of their capital to announce plans to remedy their financial standing. Comnpanies with much bigger losses will face penalties including suspension of trading in their shares.
Analysts said the insurance sector, which has faced tough competition in the last few years despite growing revenues and has over 30 listed companies, was likely to be most affected by the rules. The several firms in the sector which already have accumulated losses of 50 percent or are approaching that level will face heavier pressure to improve their performance or exit the sector. This could benefit them or, by accelerating a shakeout in the industry, benefit the larger companies. The sector slightly outperformed the overall market on Tuesday, declining 0.4 percent.
Egypt's bourse rose 1.0 percent as expectations continued to build for a new financial aid package from the oil-rich Gulf states following media reports this week that Saudi Arabia and the United Arab Emirates could pledge an additional $9 billion. Next month, Egyptians are expected to vote in a referendum on a new constitution as part of a transition back to civilian rule following the ouster of former president Mohamed Morsi in July by an army-backed government.
On Tuesday, a street protest in Cairo - commemorating the second anniversary of the deaths of 42 people in clashes with security forces - was dispersed by police who used tear gas, but no fatalities have been reported. Schroders' Sidani said Egyptian stocks - which have risen 34 percent since Morsi's ouster - could climb further on the back of Gulf support and political stabilisation. "I expect the strong performance to continue," he said.
Other regional markets were little changed on Tuesday. Dubai's index was the most volatile, rising as much as 1.0 percent during the day before closing flat at 2,856 points. It faces major technical resistance around 2,900 points, where the market stalled in late October and early November. Many analysts expect the market will trade sideways until November 27 when the result of Dubai's bid to host the Expo 2020 world fair will be announced.
"On some days you will see people getting excited about the Expo and buying, on other days you will see people taking profits," said a United Arab Emirates portfolio manager. Qatar Exchange cancelled all transactions executed on Tuesday after an unspecified technical problem disrupted its trading platform. The exchange said it hoped to resume trading as usual on Wednesday morning. It gave no details of the technical problem, which initially brought trading to a halt during the morning before it resumed for a short time, then halted again for the rest of the day. The market in Kuwait was closed for an Afro-Arab summit.