Saudi stocks fell on Sunday in response to a fall in profits at food company Almarai and weakness in blue-chip stocks, while the Kuwait index rose for the seventh straight session buoyed by the recent MSCI move to upgrade Kuwaiti stocks to emerging market. The Saudi market had opened slightly higher on selective buying in financials, but quickly lost momentum after Almarai's shares plunged.
Almarai Co fell 2.5% after it reported a nearly 12% drop in second-quarter profit and also announced the resignation of its Chief Executive Alois Hofbauer.. Saudi Basic Industries, the index's biggest stock by market capitalisation, also slipped 0.2% and lender Banque Saudi Fransi dropped almost 1%. Kuwait's index gained 1.2% with the index hitting a new high for the year, extending gains after MSCI's decision last month to move Kuwaiti equities to its main emerging markets index in 2020, a move that could trigger billions of dollars of inflows.
Kuwait has outperformed its Gulf peers in anticipation of the MSCI move, gaining nearly 26% year-to-date. Middle Eastern funds plan to continue increasing investments in Kuwait over the next three months, a Reuters poll found earlier this week. "Generally the summer period sees lower liquidity, so there is a seasonality factor. Having said that Kuwait turnover and performance remains very solid," said Mohamad Al Hajj, head of MENA Equity Strategy for EFG Hermes.
There could be increased activity in the Gulf markets in August when MSCI is set to kick in the second phase of including Saudi stocks in its emerging market index, which could add another $6.3-$8.2 in foreign fund flows. "This should also generate higher trading activity across the region," Al Hajj said. Total ownership of Saudi stocks by foreign investors has increased to 7.47% as of June 30, up from 4.67% at the end of December, stock exchange data shows, reflecting increased active and passive fund flows this year.
Property stocks weighed on Dubai index, which dropped 0.5%. Emaar Properties fell 0.5% and DAMAC Properties dropped 2.4%. Emirates NBD was down 1.8%. Qatar shares were also hit by selling in key blue-chip shares, as investors took profit from recent gains. Qatar shares gained ground in recent sessions as a 10-to-one stock split for companies on the exchange is being phased in from June 9 and will be completed by Sunday.
The move is designed to boost liquidity by encouraging smaller investors to buy shares. Bahrain's index gained 1.7% on the back of strong gains in Ahli United Bank which surged 4.9% amid expectations of completion of its merger with Kuwait Finance House.