Markets: Regional stocks

The Dow Jones Industrial Average once again reclaimed 10,000+ territory in early November owing to strong manufacturing and service sector activity. Also, an unexpected drop in unemployment claims in the United States came as a positive surprise, which pushed the broader indices higher. Investor confidence was seen returning to the euro zone as well, with the region posting GDP growth of 0.4 per cent in the third quarter of last year, suggesting the possible end of recession in the 16-nation union after five consecutive quarters of decline.

Asian markets also followed the performance of Western peers, as strong buying interest was witnessed on most of the bourses. However, this surge was accompanied by volatility. A strong yuan weighed heavily on the share price of export-oriented companies listed on the Japanese market.

Concerns over probable asset bubbles in China have kept investors' mood timid lately. The Central Bank of China in a related move recently tightened its accommodating monetary stance by increasing the Cash Reserve Ratio (CRR) ratio by 50 basis points to curtail inflationary pressure going forward. The benchmark Indian Index, Sensex, crossed the 17,000 mark again in late December, but was unable to sustain these levels as the Central Bank raised its CRR ratio to curb excess liquidity in the system. Subsequently, selling pressure was witnessed on all interest rate-sensitive stocks.

The GCC indices had a mixed performance owing to lack of liquidity amid weak risk appetite among investors. The volatility experienced on regional bourses was mainly driven by fluctuations in oil prices in international markets, where profit-booking took the crude prices to sub-$70 (Dh257) per barrel during mid-December.

ADX

The Abu Dhabi exchange lost 12.8 per cent during the three months from November to January, with major sell-offs being witnessed in real estate and construction indices, down 33.7 per cent and 20.3 per cent respectively. The energy sector sub-index suffered a loss of 18.8 per cent in the same period, mainly due to profit-booking witnessed on oil prices. Next in line was the banking and financial services sector, which declined 13.7 per cent as concerns of higher provisioning — which is hurting the bottom line of the industry players — weighed heavily on the listed companies. Among banking stocks, Union National Bank was the major drag, down 23.1 per cent, followed by Abu Dhabi Commercial Bank, which lost 20.5 per cent on the back of concerns of its loan exposure to Dubai World. Overall, the market breadth remained sluggish across the three months, with 41 decliners as against 16 advancers.

DFM

The Dubai Stock Market saw the weakest performance among the regional bourses amid ongoing concerns of the debt restructuring plan of Dubai World. Investor sentiment took a severe hit, with the benchmark Dubai General Index down 27.6 per cent in the three months from October-end despite Nakheel making the $4.1 billion sukuk payment upon its maturity. Shares of Emaar saw interim buying interest after the company announced that it was stalling its proposed merger plan with three other Dubai-based real estate developers. Arabtec shares, by contrast, suffered heavy losses on the back of news that Aabar Investments Co. (Abu Dhabi-listed) will acquire a stake of 60 per cent by subscribing to new shares in the company. Investors were seen winding down their position in Arabtec as this deal will possibly dilute shareholders' earnings in the company.

Saudi Arabia

The region's biggest bourse showed flat returns from November to January, with the benchmark TASI index down marginally by 0.3 per cent. However, the Saudi exchange recovered from the weakness experienced in mid-December on the back of surging oil prices, to which the bourse's performance has historically been linked. Consequently the petrochemical sub-index gained 3.9 per cent in the same period.

Strong crude prices also pushed the shares of index heavyweight Sabic to a 15-month high of 89.75 Saudi riyals on January 20 after the company posted a huge jump in fourth-quarter profits compared to the same period the previous year. Shares in Kingdom Holding Co. gained a substantial 46.6 per cent after the company announced it had swung back into profitability for the year 2009, after the massive investment writedowns it took in 2008 dented its outlook.

Kuwait

The Kuwait Stock market lost 4.3 per cent in November-January, with major selling pressure being exerted on banking and investment companies. Shares of Agility, Middle East's largest logistics company, lost a massive 50.8 per cent after it announced that the US Department of Defence had filed a dispute case against the company.

Selling pressure was also seen on Mobile Telecommunications Company (Zain), which lost 21.5 per cent as the company's plan to sell 46 per cent of its own stake was delayed further. Global Investment House, which recently restructured a part of its debt, declined 21.3 per cent. Market capitalisation of the Kuwaiti bourse stood at $96 billion at January-end.

Qatar

In line with the weak performance of regional peers, the benchmark DSM 20 lost 8.0 per cent in the three-month period, with all sectoral indices in negative terrain. Ezdan Real Estate Company lost a substantial 50.0 per cent of its share price following announcement of its merger with International Housing Group. Weakness was seen in the shares of Barwa Real Estate Company as well (down 20.4 per cent) after the announcement of its merger plan with Qatar Real Estate Investment Company (Alaqaria).

In contrast, Qatar National Bank, the country's largest lender, witnessed some buying interest in January after the bank reported a 15 per cent increase (year-on-year) in its net profits for 2009. The bank also proposed a distribution of 40 per cent cash dividend and 30 per cent bonus shares. Qatar Investment Authority's (Qatar's sovereign wealth fund) decision to buy a further 5 per cent stake in the listed banking stocks also provided some buying momentum in early January.

Oman

The benchmark MSM 30 index edged up 2.7 per cent on the back of gains witnessed in select industrial and banking stocks. Bank Dhofar, which posted an increase of 18.5 per cent in net profits for last year, witnessed consistent buying interest in the three months; the share up by 32.5 per cent. Shares of Renaissance Services firmed up 13.5 per cent on the back of healthy quarterly results, and the announcement that its subsidiary, Topaz Energy and Marine, had divested its offshore support vessel for $29.5 million. As at January-end, the market capitalisation of the Muscat market stood at $15 billion.

Bahrain

The benchmark Bahrain index was down 3.1 per cent, with major selling pressure being witnessed on the commercial bank and investment sub-sectors, which were down 5.2 per cent and 3.0 per cent respectively.

- The writer is Analyst, Dun & Bradstreet.