Abu Dhabi hit af­ter merger talk quashed; Saudi slips

MIDEAST STOCK MARKETS

Kuwait Times - - BUSINESS -

DUBAI: Shares of three of Abu Dhabi’s top lenders pulled back yes­ter­day af­ter the banks de­nied they were in merger talks, while Saudi shares were hit by profit tak­ing. Egypt’s stock mar­ket gained as for­eign funds con­tin­ued to ac­cu­mu­late blue-chips. Abu Dhabi’s in­dex dropped 1.7 per­cent as Union Na­tional Bank re­treated 5.2 per­cent and Abu Dhabi Com­mer­cial Bank lost 2.7 per­cent af­ter both lenders is­sued sep­a­rate state­ments yes­ter­day deny­ing last week’s Bloomberg re­port that the two lenders were in­volved in merger talks.

Sim­i­larly Abu Dhabi Islamic Bank pulled back 0.8 per­cent af­ter the lender said in a bourse state­ment that it has no merger plans. Bloomberg re­ported on Wed­nes­day that the bank is in talks to merge with Al­hi­lal Bank. Shares in the three lenders were sus­pended ear­lier yes­ter­day and trad­ing re­sumed af­ter their state­ments. “The con­sol­i­da­tion ge­nie is out of the bot­tle with the Abu Dhabi gov­ern­ment hav­ing al­ready an­nounced the merger of two banks and two sov­er­eign funds. This is a sound strat­egy when try­ing to cope with a pro­longed eco­nomic slow­down, so it is un­sur­pris­ing in­vestors are try­ing to sec­ond guess which com­pa­nies may be next in line,” said Ak­ber Khan, di­rec­tor of as­set man­age­ment at Qatar’s Al­rayan In­vest­ment.

Ru­mours have been cir­cu­lat­ing in re­cent months that as part of an ef­fi­ciency drive more bank­ing tie-ups might hap­pen in the wake of Abu Dhabi’s two largest bank­ing heavy­weights, Na­tional Bank of Abu Dhabi and First Gulf Bank push­ing ahead with their own merger, ex­pected to be com­pleted in the first quar­ter of 2017.

Yes­ter­day NBAD closed down 1.0 per­cent and FGB lost 2.9 per­cent. Dubai’s Shuaa Cap­i­tal jumped 7.5 per­cent to 1.58 dirhams ($0.43) af­ter the in­vest­ment firm an­nounced that Abu Dhabi Fi­nan­cial Group (ADFG) had car­ried out a pre­vi­ously an­nounced ac­qui­si­tion of 48.36 per­cent of the firm from Dubai Bank­ing Group, a sub­sidiary of Dubai Group, for 0.705 dirham a share.

Al­though the pur­chase price was well be­low the mar­ket price, some in­vestors are bet­ting ADFG will de­velop Shuaa into a much big­ger com­pany. Dubai’s in­dex, how­ever, closed down 0.3 per­cent with the main drag com­ing from large-cap shares. Emaar Prop­er­ties fell 0.3 per­cent and tele­com op­er­a­tor Du pulled back 0.8 per­cent.

SAUDI DIPS, EGYPT RE­SILIENT

Riyadh’s main in­dex re­treated 0.9 per­cent to 6,570 points, pulling away from tech­ni­cal re­sis­tance on the July peak of 6,703 points. The in­dex is still up 16.3 per­cent over the last 30 days. Bank­ing shares, which have been the chief gain­ers over that pe­riod, were some of the worst per­form­ers yes­ter­day as all but two of the 12 listed lenders closed lower. Banque Saudi Fransi dropped 3.7 per­cent to 26.10 riyals, it is now trad­ing at par with the mean fair value of an­a­lysts polled by Reuters. “When a mar­ket gains about 20 per­cent in one month some profit tak­ing is a given. Sen­ti­ment swung from ex­treme fear to ex­treme greed in a short pe­riod,” said Khan of Al­rayan In­vest­ment. Khan added that the rally has been fu­elled by in­sti­tu­tional in­vestors while Saudi re­tail in­vestors - which usu­ally make up the ma­jor­ity of trad­ing vol­umes - have re­mained sell­ers. “As a re­sult, the larger, more liq­uid names have done very well.” Ac­cord­ing to ex­change data, lo­cal mu­tual funds were ag­gres­sive net buy­ers of Saudi stocks over a one week pe­riod to Nov. 17 while re­tail in­vestors were net sell­ers.

In Egypt, the blue chip in­dex closed up 0.5 per­cent, a fresh eight-year high but traded vol­umes fell by about 30 per­cent from a record high struck on Thurs­day. The in­dex is now up 32.3 per­cent since the Egyp­tian pound was floated on Nov. 3 and for­eign funds con­tin­ued to be net buy­ers of shares on Sun­day, bourse data showed. “For­eign buy­ers did not re­lent de­spite some weak­ness in the pound,” said a Cairo-based bro­ker. The Egyp­tian pound was trad­ing at be­tween 17.30 and 17.45 against the dol­lar af­ter clos­ing at about 16.05 on Satur­day. Ora­som Tele­com, the most traded share, added 5.9 per­cent and Ara­bia Cot­ton Gin­ning climbed 6.5 per­cent. But real es­tate in­vest­ment firm Pioneer Hold­ing Com­pany fell 1.0 per­cent af­ter the com­pany posted a 34.8 per­cent drop in third-quar­ter net profit, with rev­enue fall­ing about a fifth for the pe­riod.

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