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Egypt gains as vote on constitution starts, Gulf shares mixed

DUBAI: Egypt’s stock market rose for a fourth consecutive session Tuesday, to levels last seen before the 2011 revolution, as the country voted on a referendum that is a key step in its planned transition back to civilian rule. Gulf markets were mixed as some investors took profits. Cairo’s benchmark index climbed 1.1 percent to close at 7,196 points, a fresh three-year high. During the day it rose as high as 7,258 points, eclipsing the January 2011 peak of 7,248 points, but it fell back before the close, leaving that major technical resistance unbroken.

Presidential elections will follow if the two-day referendum approves a new constitution as expected, and a positive result could lead to a presidential bid by army chief General Abdel-Fattah al-Sisi.

The stock market’s rise in recent days can be seen as an endorsement by the investment community of Sisi, who is viewed by many investors as the best option to ensure political and economic stability in the next few years.

The market’s sizeable intraday pullback, however, suggested the political euphoria may be close to running its course for now, with the market up about 50 percent since Islamist President Mohammad Morsi was overthrown last July.

“The market has had a good run in the past six months and has largely priced in the political transition that we’re going to see in the next few months,” said Simon Kitchen, director of regional strategy and research at EFG-Hermes in Cairo.

Kitchen said further gains depended more on improvement of the economy than on political developments.

Trade in the Egyptian market was very heavy though volume was down slightly from Sunday’s level, which was the highest since September 2012.

In Dubai, shares in builder Arabtec jumped 5.5 percent to 3.09 dirhams, a 63-month high, after the firm said one of its units was awarded a 2.59 billion dirham ($705 million) construction contract on Abu Dhabi’s Al-Reem Island.

Investors have been hoping that Arabtec will win more Abu Dhabi business after the company replaced its chief executive last year in a shake-up led by Abu Dhabi fund Aabar, its largest shareholder, which has been tightening its control of the group.

The stock faces major technical resistance in the 2.97-3.16 dirham area, the peaks in February 2012 and November 2009; an initial test of this area last week failed.

Arabtec outperformed the Dubai benchmark, which climbed 0.5 percent to a fresh five-year high. Abu Dhabi’s measure slipped 0.3 percent, easing off Monday’s five-year peak.

Qatar’s bourse rose 0.3 percent, also hitting a fresh five-year high. The market gained for its 11th consecutive session, its longest bull run since April 2008.

“Qatar, like the UAE, is looking a bit stretched on valuations – banks have performed extremely well in the past month so it’s difficult to justify new highs from here,” said Sebastien Henin, portfolio manager at The National Investor.

Qatar National Bank advanced 1.5 percent to a record high on hopes for positive earnings. After the market’s close, the region’s largest bank posted a 13.7 percent increase in fourth-quarter net profit to 2.4 billion riyals ($659 million), slightly trailing analysts’ expectations of 2.48 billion riyals.

Henin said there was little upside for QNB in the short term, with the results mostly priced in.

“We could have a continued rotation toward high-dividend firms in UAE and Qatar and in that case, midsize banks will be in favor,” he added.

In Saudi Arabia, the measure slipped 0.2 percent, its second decline since Sunday’s five-year high.

Oman’s bourse was closed Tuesday for a religious holiday.

 
A version of this article appeared in the print edition of The Daily Star on January 15, 2014, on page 6.

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Summary

Egypt's stock market rose for a fourth consecutive session Tuesday, to levels last seen before the 2011 revolution, as the country voted on a referendum that is a key step in its planned transition back to civilian rule. Gulf markets were mixed as some investors took profits. Cairo's benchmark index climbed 1.1 percent to close at 7,196 points, a fresh three-year high.

Arabtec outperformed the Dubai benchmark, which climbed 0.5 percent to a fresh five-year high.

Qatar's bourse rose 0.3 percent, also hitting a fresh five-year high.


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