Oil near $50 hurts Gulf markets, but Kuwait jumps

Major stock markets in the Middle East fell on Wednesday, following international bourses lower as crude oil prices traded down near $50 a barrel, but Kuwait jumped in heavy trading by local retail investors. The Saudi Arabian index lost 1.2 percent in low turnover, with all but one of the 14 petrochemicals makers falling by at least 1 percent and bellwether Saudi Basic Industries dropping 1 percent.
Insurer Gulf Union was down 3.2 percent after its board recommended reducing its share capital to 150 million riyals ($40 million) from 220 million riyals by cancelling 7 million shares.
In recent days several small insurance companies have announced plans to reduce losses and improve their capital structures by reducing share capital. However, many investors expect tough competition in the sector to drive merger activity in the near future and are exiting positions until there is more clarity.
Supermarket operator Al Othaim declined by 0.7 percent after its board recommended a cash dividend of 2 riyals per share for 2016. The payout was more than the previous year's but short of market expectations. Analysts at NCB Capital had forecast a dividend of 2.3 riyals.
Construction company Jabal Omar, meanwhile, rose 1.5 percent after the company said it had signed an agreement to sell three hotels and a mall to a real estate fund for 6 billion riyals ($1.6 billion). The company will then lease and operate the assets, using the proceeds to reduce outstanding loans and finance other projects.
Jabal Omar also said it had extended a bridging loan with a local lender, Bank Albilad, for four years, attributing the longer term to improvement in the company's liquidity position. It did not give the size of the loan.
Dubai's index fell by 0.6 percent. Builder Arabtec, the most heavily traded stock, dropped by 0.7 percent and Dubai Financial Market, the only listed exchange in the Gulf, lost 2.3 percent.
In Abu Dhabi, the index retreated 0.7 percent, weighed down by profit-taking in some of the blue-chip stocks that had risen in the previous session.
Real estate developer Aldar Properties retreated by 0.8 percent and Abu Dhabi Commercial Bank was down 1.3 percent.
In Cairo, the blue chip index fell 0.2 percent in thin trade as three fifths of traded shares declined. Sidi Kerir Petrochemicals lost 1.3 percent.
In stark contrast to the rest of the region, Kuwait's main index jumped by 2 percent, with most trade focusing on small and mid-sized companies favoured by short-term investors. Construction materials provider National Industries rose by 5 percent.
The index is now up 22 percent since the start of the year, outperforming regional benchmarks by a large margin and outpacing the MSCI Emerging Market Index.
Kunal Damle, senior institutional broker at SICO Bahrain, said the Kuwaiti market had been overlooked for the past four years and was now benefiting from government austerity measures that have been less stringent than those neighbouring Gulf countries over the past two years.
A Doha-based asset manager, however, said he saw no fundamental justification for the surge in Kuwait's index, which he described as highly speculative.
"Most of the volume is coming from retail investors who come into the market to turn a quick profit and leave. This is not the characteristic of a stable rally," he added. The manager said that Kuwait is not cheap in terms of price-to-earnings ratios. "I think the market will witness a huge correction before the summer," he said.