DUBAI: Saudi stocks ended higher for a second day and Qatar also advanced on Sunday as banks and petrochemical stocks led gains, but UAE markets slipped with many traders wary ahead of the opening on global markets this week.
The Saudi index climbed 0.8 percent, after gaining 2.1 percent on Saturday, the first session after the Eid al-Fitr Muslim holiday which began on Aug. 25 in the kingdom.
Saudi Basic Industries Corp (SABIC) and Saudi International Petrochemical Co (Sipchem) added 0.3 and 0.6 percent respectively.
Canada's Methanex Corp said on Aug. 31 it would keep methanol prices for Asia flat in September, bolstering sentiment for rival producers such as SABIC and Sipchem.
"The Saudi market is catching up with the S&P 500 - before the Eid break we were matching it step by step," said a Riyadh-based trader who declined to be named.
"August's laggards such as Dar Al Arkan, NIC (National Industrialization Co) and Alujain are now outperforming."
Dar Al Arkan climbed 4 percent NIC added 2.7 percent and Alujain gained 1.4 percent.
Riyad Bank and Samba Financial Group added 0.6 and 0.7 percent respectively, helping the bank index trim its 2011 losses to 12.1 percent.
"Saudi banks are rate-sensitive a large part of lenders' deposit base is interest free or earns very low interest and so are low cost," said Shahid Hameed, Global Investment House head of asset management for the Gulf region.
"People had expected interest rates for banks' assets to rise, increasing spreads, but the US now says interest rates will not increase and demand for borrowing in Saudi also hasn't improved significantly, so there's no trigger to increase bank earnings."
In August, the US Federal Reserve vowed to keep benchmark interest rates near zero through mid-2013.
Qatar National Bank and Commercial Bank of Qatar climbed 2.3 and 2 percent respectively to lift Doha's index to a month-high.
"Banks will continue to lead - most of the foreigners are out of the market, but local funds are buying and are focusing on the banking sector," said Hani Girgis, assistant chief dealer at Dlala brokerage.
"They are targeting Doha Bank, Commercial Bank of Qatar, Qatar National Bank and Qatar Islamic Bank, in that order."
Investors are betting conventional lenders will enjoy a one-off gain as they sell their Islamic operations by year-end to meet a central bank order, Girgis added.
Qatar Islamic rose 0.3 percent, but Doha Bank dipped 0.3 percent.
"Qatar banks are achieving strong growth and are paying generous dividends, while also trading at lower valuations than Saudi banks, so are more attractive stocks for investors," said Global's Hameed.
Qatar's economy is forecast to grow 16.7 percent this year, according to a Reuters poll in June.
Dubai's benchmark fell 0.6 percent, taking its 2011 losses to 9 percent. It is down 76 percent from a 2008 peak and shows scant sign of a sustained recovery, with property prices seen continuing to fall. Real estate-related stocks dominate bourse trading.
"There is a lack of volume and no great conviction, especially with a US holiday tomorrow people want to wait and see how international markets fare," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.
"People have cash, but they expect the market to be at similar levels in two week's time.
Copyright Reuters, 2011
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