Gulf Arab Stocks Trim Worst Start in 10 Years After Oil Rebounds

  • Brent crude posted second weekly advance on supply cut bets
  • Bloomberg GCC 200 Index extends rising streak to three days

Gulf Arab equities trimmed their worst January in at least a decade after oil capped its second weekly advance.

Dubai’s DFM General Index led gains in the region, climbing to the highest in more than three weeks as the number of shares traded was almost double the six-month average. Abu Dhabi’s ADX General Index had the biggest increase in more than a year. Saudi Arabia’s Tadawul All Share Index rose a fourth day, the longest streak since November.

Today’s trading volume in Dubai (blue line) is almost double the six-month average (grey line).

“We were sitting on the sidelines for most of January,” said Muhammad Shabbir, the Dubai-based head of equities and funds at Rasmala Investment Bank Ltd. “We’re looking to enter the market again this week after the losses we’ve seen this month. February could well shape up as a positive month.”

Equities across emerging markets rallied last week as risk appetite strengthened on bets the Federal Reserve will refrain from raising interest rates soon and as oil jumped on speculation an output cut may be on the way. Governments in the six-nation Gulf Cooperation Council, which includes the United Arab Emirates and Saudi Arabia, depend on energy revenue to fund spending.

Brent crude for March settlement, which expired last week, rose 2.5 percent to $34.74 a barrel on the London-based ICE Futures Europe exchange on Friday. The more-active April contract increased to $35.99.

Worst January

The Bloomberg GCC 200 Index, a gauge of 200 of the region’s biggest companies, added 2.1 percent, gaining for a third day. The measure has lost 9.2 percent this month, the worst start to a year since the index was created 10 years ago.

Correlation between Gulf stocks and the price of Brent crude has increased since July.

Abu Dhabi’s ADX General Index advanced 3.7 percent. First Gulf Bank PJSC was the biggest contributor to gains with a 12.4 percent jump, the most since May 2005. A shareholder in the U.A.E.’s third-largest lender canceled a share sale valued at about 1.2 billion dirhams ($327 million), according to people familiar with the matter, after the transaction had already been priced and allocated to investors. The bank is partly owned by the government.

Dana Gas PJSC reported a temporary interruption in gas flow in Iraq at the end of last week, the company said in a statement to the Abu Dhabi stock market. The shares dropped 2.3 percent.

Bullish Dubai

Emirates NBD PJSC, Dubai’s biggest lender, led the emirate’s benchmark index as just 211,000 shares were exchanged. The bank’s weight on the gauge was increased this month as part of a regular index review.

Emaar Properties PJSC, which has the largest weighting, added 4.5 percent to the highest level in three weeks. The developer, which is about 30 percent owned by the Dubai government, signed an agreement with Sharjah Investment & Development Authority, known as Shurooq, to form a real estate company, the state-run WAM news agency reported.

The DFM General Index increased 4.9 percent to the highest level since Jan. 6, taking its three-day gain to 11 percent. The measure’s 30-day volatility is near the highest in a year following the swings in January.

The DFM General Index’s MACD showed a bullish indicator last week as the white signal line rose above the red.

Dubai stocks’ moving average convergence and divergence indicator, known as MACD and used to indicate changes in a direction or trend, has risen through a “signal” line since Jan. 27, a bullish indicator to many technical analysts.

Saudi Assets

Saudi Arabia’s benchmark added 2 percent, taking its four-day gain to 6.9 percent. Saudi Basic Industries Corp., one of the world’s biggest petrochemicals companies, rose 3 percent to the highest in almost three weeks. National Commercial Bank, the kingdom’s largest lender, jumped 5.4 percent. Al Rajhi Bank rose 3.1 percent.

“The sentiment is improving as oil prices rebound,” said Mohammed Alsuwayed, the Riyadh-based head of capital and money markets at Adeem Capital. “Saudi stocks are regaining investors’ confidence and trust and today’s performance is a follow-up to last week’s gains. This is likely to continue for the rest of the week.”

Yanbu Cement, a Jeddah-based cement and clinker manufacturer, rose 9.9 percent, the most since January 2009. The company’s board recommended on Thursday a dividend of 3.5 riyals for the second half of 2015.

The kingdom’s net foreign assets shrunk by about 3 percent in December to more than $608 billion, bringing the drop in 2015 to $115 billion, according to central bank data released on Thursday.

Kuwait Rally

Oman’s MSM 30 Index added 3.3 percent, the most since Dec. 22. Bahrain’s BB All Share Index rose 1.3 percent, also the most since December, and Qatar’s QE Index advanced 2.3 percent to the highest in nearly three weeks.

Kuwait’s SE Price Index increased 2.1 percent, the biggest jump in more than a year. Kuwait Finance House rose 5.3 percent after the company’s fourth-quarter profit climbed 10 percent and the board recommended a 17-fil cash dividend for 2015 and one bonus share for every 10 held. The stock’s three-day gain is the biggest since 2009.

Egypt Volatility

Egypt’s EGX 30 Index rose 0.1 percent, extending its winning streak to five days, the longest in more than a month. That pares the gauge’s decline to 14 percent this month. The measure’s 30-day volatility reading is near the highest since July 2013.

Egypt’s 30-day (orange) and 100-day (purple) volatility are near the highest in three years.

“This rebound indicates that the market may have found its bottom,” said Hesham Wafa, a Cairo-based institutional sales trader at Mubasher Trade. “We’re seeing strong interest from retail investors on the back of the advance in global markets. Much of where we go from here depends on the stabilization of oil prices, but we’re a long way from declaring a definitive end to the down trend.”

Emaar Misr for Development SAE, the country’s second-biggest real estate developer, dropped 0.9 percent. The stock was added by the bourse to the benchmark index for the first time since the company went public in June. Commercial International Bank Egypt SAE’s 1 percent increase was the biggest contributor to the EGX 30’s gains. It accounts for about 31 percent of the gauge.

Israeli Gas Deal

Israel’s TA-25 Index rose 1.6 percent to 1,475.85 at the close in Tel Aviv, the highest in more than two weeks. Mylan NV and Perrigo Co. were the biggest contributors to the advance, following gains in their U.S. shares on Friday.

Israel’s natural gas stocks were among the best performers after partners in the country’s Leviathan gas field signed a $1.3 billion supply deal with Edeltech Group. Delek Group Ltd., the nation’s largest-traded energy company, increased 7 percent to the strongest level since Jan. 12. Its units Avner Oil Exploration LP and Delek Drilling LP advanced 5.4 percent and 5.6 percent, respectively.

The country’s 1.75 percent benchmark bonds due Aug. 2025 rose 0.55 agora to 99.45 agorot on the shekel, pushing the yield down six basis points to 1.90 percent, the lowest since Oct. 27.

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