Bank shares to play major role this year

(PATRICK CASTILLO)                                       

 

 

A tentative start to the year on the Saudi stock exchange on Tuesday will leave investors in Dubai and Abu Dhabi uncertain about this quarter’s direction, especially after analysts said on Monday that the country’s best-performing sectors of 2007 may see profitability contract for the last quarter as well as the year.

Saudi shares dipped three per cent on Tuesday and the Tadawul All-Share Index closed at 10,842.24. This is the index’s biggest one-day fall since June 16, according to Bloomberg data. Saudi Basic Industries Corporation and Al Rajhi Bank led the fall.

At the same time, however, the Muscat Securities market, the only other GCC exchange open on Tuesday, gained 1.6 per cent to close at 9,179.64, its third consecutive rise. The Omani index was the best performer in the Gulf last year, rising more than 60 per cent.

UAE banking shares will be the ones to watch today, analysts believe, as the sector recorded a profit increase of more than 25 per cent in 2007, according to preliminary data released by the UAE Central Bank last week.

Combined banking profits are expected to be Dh25 billion compared to the previous year’s Dh20bn, Central Bank Governor Sultan Nasser Al Suwaidi told reporters.

Moody’s Investor Services said in a report last week that the asset quality of the UAE banks has improved over the past five years. Non-performing assets of banks rated by Moody’s fell from 8.3 per cent in 2002 to 1.7 per cent last year while provisioning increased from 80 to 106 per cent in the same period.

Sustained economic expansion has put UAE firms in a comfortable position vis-à-vis their own earnings, which are expected to maintain their growth momentum. That coupled with fresh measures to rein in inflation – such as the reduction of the Dubai rent cap to five per cent from seven per cent– have resulted in optimism on the stock exchanges.

The UAE indexes are trading at a price-to-earnings multiple of just 12, indicating that there is tremendous room for growth.

The markets will open tentatively, analysts said, and trade in a narrow band until the full-year results for 2007 begin to trickle in towards the third week of this month. If performances exceed market expectations, the indices will have a spectacular run this year.

The Dubai Financial Market general index gained more than 45 per cent in 2007 while its counterpart on the Abu Dhabi Securities Market put on about 52 per cent. They joined three other GCC indices on the list of top 10 gainers last year among emerging markets.

Saudi stocks bonanza

Five Saudi firms are likely to offer 3.2 billion shares estimated at some SR37.9 trillion (Dh37.1trn) this year, Asharq Al Awsat newspaper reported.

On Saturday, refining and petrochemical company Petro-Rabigh will offer 219 million shares, or 25 per cent of its capital, at SR21 per share. It is expected to be the largest Saudi IPO this year. Half of the shares are allocated to Saudi nationals.

The list of issuers includes the mining company Maaden, Riyad Bank, Inmaa Bank and MTC Saudi (Zain). Some of the IPOs will be the largest in Saudi Arabia, Gulf countries and maybe the Arab region, the newspaper said.

Saudi Zain will offer 700 million shares worth SR7 billion. Maaden intends to offer 400 million shares, or 50 per cent of its SR8bn capital, this year.