* Strong earnings also anticipated from Qatari banks* Long rally unlikely with euro zone crisis unresolved* Egypt shows signs of bottomingBy Nadia Saleem and Tom PfeifferDUBAI/CAIRO Oct 12 (Reuters) - Saudi Arabia’s stock market
is likely to be largely unaffected by geopolitical
tensions with Iran next week and to focus instead on
petrochemical companies which are due to announce quarterly
earnings, analysts said.Washington’s accusation that Iran backed a plot to kill the
Saudi ambassador to the United States has the potential to hurt
markets. But Saudi stocks did not react to it on Wednesday and
may not do so unless outright conflict looks likely.”At this time it’s not a concern, it’s only an accusation.
Right now markets are being driven by fundamental factors like
earnings and (economic) uncertainty in Europe and the U.S.,”
said Youssef Kassantini, a Saudi-based financial analyst.”The tension has always been there between Saudi and Iran,
which did affect the market and created a level of fear, but it
is continuous and the market is used to this factor. I don’t
think it will develop into anything that will move the market.”Mohammed Alomran, a member of the Saudi Economic
Association, a think tank, said: “It had zero effect on the
market which was more interested in the international scene,
mainly the Obama (jobs) bill that didn’t get passed and profit
announcements on a local level.”Along with banks, petrochemical stocks are one of the two
most heavily weighted sectors in the main Saudi stock index,
representing about 30 percent of total market capitalisation.
The petrochemical index rose 2.6 percent in the past
week, while the main index climbed 1.7 percent.”Saudi petrochemical numbers will be good although slightly
off Q2 numbers. But compared to Q3 2010, there will be growth,”
said Shakeel Sarwar, head of asset management at Securities &
Investment Co in Bahrain.Saudi Basic Industries Corp (SABIC), the world’s
largest chemicals producer, is expected to post a net profit
rise of 48.9 percent when it reports in coming days or weeks,
according to analysts polled by Reuters. The stock is down 12.9
percent for the year and has an extremely low trailing
price-earnings ratio of 10.2.”Markets are waiting for the leader stocks to announce
results, especially SABIC,” said Tarek Al-Madi, an independent
Riyadh-based financial analyst.”The market will take the cue from these results and then
the speculative trading will start on the rest of the stocks.”Saudi Arabia’s Yanbu National Petrochemicals Co
(Yansab) on Tuesday said its third-quarter net profit more than
doubled, helped by higher prices and increased output, but the
results still missed analyst expectations. The stock fell 1.3
percent lower as investors booked profits.Light crude fell from $99.6 a barrel in July to 79.2
at the end of September, its lowest level since September 2010.”Petchems’ earnings should be reasonable. Product prices are
still good in year-on-year terms and I’m not aware of there
being much disruption to volumes,” said Paul Gamble, head of
research at Riyadh-based Jadwa Investment. “But I don’t think
earnings will be as strong as Q2 2011 given the recent falls in
product prices.”QATAR BANKSQatari bank earnings may also stimulate activity in coming
weeks. Regional heavyweight Qatar National Bank has
already reported, posting a 27 percent jump in third-quarter net
profit to 1.9 billion riyals, beating analysts’ estimate of 1.8
billion riyals.The stock has risen for five straight sessions and is up 7.4
percent on the year, outperforming the main market index
which is down 3 percent.Qatar Islamic Bank is expected to post 14 percent
growth in net profit, according to an average of five analysts’
estimates.”Volumes are low (in Qatar) but there is still a belief of
strong results coming from banks,” said Samer al-Jaouni, General
Manager of Dubai-based Middle East Financial Brokerage.
“Institutionals are accumulating banks because of historically
attractive cash dividends at year-end.”However, any sustained rally in Gulf equities continues to
look unlikely while the euro zone debt crisis remains
fundamentally unresolved, analysts said.”Strong corporate performance is going to be a catalyst for
the market if we see some serious progress toward resolving the
debt issues in the euro zone. But at the moment, the global
uncertainty is hanging over the market,” Jadwa’s Gamble said.EGYPTEgypt’s market , down 43.3 percent this year, will
remain vulnerable to political instability and any further
violent unrest after clashes on Sunday night between the army
and Christian protesters in Cairo left at least 25 people dead.But a sharp rebound of the index off an intra-day low of
3,820 points in the past three days, to a close of 4,050 on
Wednesday, suggests the market may have found a fairly solid
bottom because of cheap valuations.The 3,380-point level, a multi-year low hit in early 2009,
is seen by many traders as strong chart support.”What we have now is not heavy selling but a lack of buyers.
Stocks are attractive in the long term but in the short term
we’re going to be in an extremely tight range,” said a foreign
sales trader at CIBC in Cairo.He forecast the index would remain in a range of 3,800 to
4,200 points for some time, possibly falling as far as 3,400
before foreign investors returned in significant numbers.
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