Egypt index gains on property stocks

Egyptian real estate stocks surged yesterday after two big companies in the sector said they might merge, while Saudi Arabia fell sharply.

In Egypt, the stock index gained 1.4 per cent as Sodic jumped 5.5 per cent to a 10year closing high and Madinet Nasr for Housing and Development added 7.4 per cent to a record high, although both stocks ended well off their intra-day highs. The companies said they would start preliminary talks on co-operation that might involve a merger or acquisition; EFG Hermes will advise Madinet Nasr.

Any merger would bolster both entities against growing competition, combining Madinet Nasr’s rich land bank with Sodic’s brand and execution expertise, Naeem brokerage said.

Other real estate stocks climbed on speculation that a deal could encourage more M&A in the sector; Palm Hills Development gained 3.6 per cent and Heliopolis Co for Housing and Development rose 3 per cent.

Saudi Arabia’s market slid in the final hour, with the index losing 1.9 per cent, its biggest drop since October. The Saudi market was vulnerable to profit-taking after surging in the weeks before index compiler FTSE Russell decided in late March to upgrade Riyadh to emerging market status.

Dubai’s index, which has been trading at two-year lows, closed 1.4 per cent higher, led by property and construction stocks. Trading volumes was the highest this week but remained modest.

Emaar Properties, Dubai’s largest property developer, rebounded 4.8 per cent. Emaar had reached a level where it became a buying opportunity, said Marie Salem, director of Capital Markets at FFA Dubai; its trailing price-earnings ratio had sunk to about seven times.

Earlier this year, investors exited UAE markets and built positions in Saudi Arabia and Egypt, but now there is a “rotation back to the UAE and more is expected in the next few months,” Mr Bhandari said.

The Abu Dhabi index slipped 0.5 per cent as First Abu Dhabi Bank lost 1.6 per cent, but Union National Bank rose 2.7 per cent after Sico Bahrain upgraded the stock to “buy” from “neutral”, saying it had the cheapest valuation, adjusted for return on equity, in its GCC universe, along with a dividend yield of 5.6 per cent.