Egypt's index made its largest drop in seven months on Monday on fears that protests which unseated Tunisia's leader might spread to other Arab states. Cairo's benchmark fell 2.4 percent, its largest decline since June 22 as other Middle East indexes also retreated.
An Egyptian man set himself alight near parliament on Monday morning in an apparent protest against poor living standards, a witness and officials said, echoing a self-immolation that spurred the wave of demonstrations in Tunisia. Investment bank EFG-Hermes fell 6.4 percent and Telecom Egypt dropped 3.2 percent. "There's a bit of a strong market correction, with a catalyst being the contagion factor from Tunisia," says Mohamed Seddiek, senior research manager at Prime Securities. Saudi Arabia's Samba Financial Group fell 3.2 percent, its largest drop since June after its fourth-quarter profit missed estimates, while other banks also fell.
"Balance sheet expansion has not come through and in the case of Samba there has been balance sheet contraction," said Walid Shihabi, Shuaa Securities chief executive. "Key revenue drivers continue to show negative signs. Lower provisions are the primary drivers of beats on the bottom line, but people are more concerned about a return to balance sheet growth." Telecoms firm Mobily rose 0.9 percent, having earlier equalled a two-year high, after it reported above-forecast quarterly profit.
"It's a matter of time before Mobily's shares rally further," said Simon Simonian, Shuaa Capital telecoms analyst. "Mobily is trading at nine times earnings, has increased its dividend and provides earnings visibility and a strong track record, so it deserves to be trading at a premium." Saudi Fertilisers Co (Safco), an affiliate of Saudi Basic Industries Corp (SABIC), rose 5.1 percent to a 27-month peak as its quarterly profit nearly tripled.
On Monday, SABIC said Safco had cancelled plans for a steel plant. Safco will look into building a fertiliser plant, Safco 5, to produce urea. SABIC climbed 1.4 percent. "(This) will enable Safco to focus on its core business, which offers considerably higher margins," said Ankit Gupta, senior research analyst at Securities & Investment Co (SICO).
"Safco has been a leveraged play on urea and ammonia prices, but capacity increase will provide support to earnings growth as well. For SABIC, what it loses from steel will be more than offset by increased SAFCO earnings. It's marginally accretive." Abu Dhabi's Aldar Properties fell 3.8 percent to a new five-month low, extending losses since unveiling a restructuring plan dilutive to shareholders.
UAE markets are struggling to arrest their decline. Volumes hit to a six-year low in 2010, and trade is also muted this year, while Dubai is down 74 percent from a 2008 peak. "The catalyst can't come from the outside like oil prices going up or the US economy recovering, it will have to be something internal and fundamental," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments. Over-supply in the real estate market and lacklustre earnings growth at banks make this is difficult, he adds.