DFM opens firm, outlook positive for GCC markets

Dubai Financial Market (DFM) opened strong on Sunday, the first day of the week, with all sectors pushing the market up. At 10.15am, the benchmark index was 1,695.83, up 12.14 points or 0.72 per cent. Telecom sector was the biggest gainer, rising by almost 2 per cent. Abu Dhabi Securities Exchange (ADX) was also up marginally by 0.49 point. Gulf stock markets could rally on the back of positive global sentiment and telecoms are likely to remain in focus, but some stocks may come under selling pressure ahead of quarterly results. Global stocks edged higher on Friday after Federal Reserve officials said more must be done to lift the slow-growing U.S. economy and oil prices rose 2 per cent, posting their best percentage weekly gain in nearly 7 and a half months. “It should be a good week,” says Sebastien Henin, portfolio manager at The National Investor. "The international economic climate is relatively good, oil prices are good, recent bond issues from the region - Dubai and Morocco - are selling well." "So there is an interesting flow." The regional telecoms sector may continue to lead investor interest in the wake of Emirates Telecommunications Corp's bid for Kuwaiti telco Zain. Etisalat said it offered 1.7 dinars a share for a 46-per cent stake in the Gulf Arab region's third-largest telecoms firm, valuing the stake at just under $12 billion. If completed, Etisalat would have a stake in two Saudi operators - Mobily and Zain Saudi Arabia -- and would need to offload one, as per Saudi telecom rules. Investors in Zain's Saudi affiliate reacted well to news of the Etisalat bid. On their first trading day after the announcement, shares in Zain Saudi Arabia rose intraday by up to 5.7 per cent on Saturday. However, the Saudi index ended just 0.1 per cent higher on Saturday, and analysts are gearing up for third quarter earnings, which could make investors more cautious. Bahrain-based Sico bank said Qatar Telecom could also be a contender for the Saudi Zain stake. But earnings remain in focus. "As quarterly earning announcements draw nearer, investors reposition themselves depending on forecasts they receive and these tend to be very disparate," says Turki Fadak, a member of Jeddah's Trade Chamber's financial markets committee. "Things are reassuring with oil prices at a healthy $80 per barrel although the continued rise in gold prices is pressuring the dollar and is therefore eroding Gulf currencies' strength." Fadak said all eyes should remain on regional banks. "People worry that some banks face more provisions for non-performing loans in Q3," he adds.