Egypt stocks fall amid Brotherhood probe; Saudi equities retreat
Egypt's stocks dropped, spurred by concern assets owned by the chairman of the nation's biggest producer of packaged milk could be nationalized after the government assess his ties to the Muslim Brotherhood. Saudi equities also declined.
Egypt's EGX 30 Index declined 2.1 percent to 7,712.72 at 1:07 p.m., the lowest level in a month after Juhayna Food Industries tumbled 7.5 percent, the biggest decliner by percentage points. In Saudi Arabia, the Tadawul All Share Index decreased 2 percent led by Jabal Omar Development Co.
Chairman Safwan Thabet's assets were frozen by a committee in charge of investigating the Muslim Brotherhood, which the government labels a terrorist organization. Juhayna isn't impacted by the decision, it said in a statement last week.
"I am sure there will be an appeal, but the bigger worry is that if it will lead to nationalizing of stake, that's what people are worried about," Allen Sandeep, Cairobased director of research at Naeem Brokerage, said by telephone in Cairo. "If investors are worried about nationalization then the question is who will be the new management and will nationalization be perceived as a good thing."
Saudi Arabia is OPEC's biggest exporter, and the nation relies on oil for about 90 percent of its revenue. Brent crude sank to $49.03 a barrel on Friday. "Market fundamentals are weak along with the a negative outlook of oil prices," Mohammed Al-Suwayed, the head of capital and money markets at Adeem Capital said by phone from Riyadh.
Kuwait's gauge retreated 0.6 percent, while Bahrain's fell 0.2 percent. Oman's MSM30 Index lost 0.4 percent.
In Dubai, the DFM General Index fell to the lowest since May 31 after the United Arab Emirates' biggest publicly-listed builder reported a third straight quarterly loss. Arabtec Holding Co. slumped 5.4 percent in Dubai to 2.11 dirhams, the lowest since March 26, bringing the decline this year to 24 percent, compared with a 4.2 percent gain for Dubai DFM gauge. Abu Dhabi's ADX General Index retreated 1.3 percent.
Arabtec, which helped build the world's tallest tower in Dubai, posted a 718.4 million-dirham loss ($196 million) in the last quarter, compared with a profit of 102.4 million dirhams a year earlier, as costs increased. Three of the companies' top executives quit last month as part of a reorganization plan to reduce costs.
Rising costs "indicate that they have been too aggressive in picking and pricing some of the projects," said Sebastien Henin, who oversees $90 million at The National Investor in Abu Dhabi. "Now they are thinking of project reviews, which means the Arabtec saga continues."
Last month's resignations came 13 months after Chief Executive Officer Hasan Ismaik quit and several top managers were dismissed amid speculation the company was losing government backing. The shakeup sparked a selloff in Dubai's benchmark index, sending the DFM gauge tumbling more than 20 percent in June 2014. The company accounts for about 5 percent of the index. Arabtec's loss is "adding to already bearish sentiment in the market," said Henin, who said he will remain cautious about trading the stock until there's clarity on the status of the company's projects and its finances.
U.A.E. equities will see passive outflows of $17 million after the country's weighting was reduced one basis point to 0.83 percent on MSCI Inc.'s Emerging Markets Index, Cairo-based investment bank EFG-Hermes Holding SAE said last week.
First Gulf Bank PJSC lost 1.7 percent, poised for a fourth day of losses and leading declines in Abu Dhabi. The bank accounts for 27 percent of Abu Dhabi's index of equities. Abu Dhabi Commercial Bank PJSC and National Bank of Abu Dhabi PJSC also headed for at least the third day of losses.
Qatar's QE Index advanced 0.1 percent, led by Ezdan Holding Group. Qatar's weighting in MSCI's emerging markets index will increase and the market will see "significant inflows" following the index provider's quarterly review, EFG-Hermes said. Ezdan and the Commercial Bank QSC will attract a combined $138 million of passive inflows, it said.
Israel's TA-25 Index gained for a second day, adding 0.4 percent to 1,718.70. The cabinet may decide on the regulatory framework for natural gas fields on Sunday, which was already agreed upon last week by the developers and the energy ministry. Delek Drilling-LP and Avner Oil Exploration-LP, partners in the Leviathan and Tamar offshore natural gas fields, increased 2.3 percent and 1.7 percent, respectively.
"There is optimism in the market that the terms and conditions of the gas framework that is being voted on today will be even more in favor of the gas companies," Steven Shein, a trader at Psagot Investment House Ltd. in Tel Aviv, said by phone. The yield on the country's 1.75 percent bonds due August 2025 fell one basis point to 2.26 percent after rising as much as seven basis points earlier today.