Investors Switch To Kuwait, Oman As UAE Weakens

Dubai’s stock index fell for a third consecutive session on Tuesday after the local regulator tightened margin lending rules and some investors started shifting into markets which saw slower growth last year, such as Kuwait and Oman.

Dubai’s index, which hit a five-year peak last week and more than doubled in 2013, fell 1.5 per cent, extending a pull-back that began after the Securities and Commodities Authority said it would crack down on unlicensed margin lending.

That prompted some brokers to ask clients to sell shares to lower margin levels.

“I think the market was very stretched and it is completely natural to see some profit-taking now,” said Sebastien Henin, portfolio manager at The National Investor.

“I am expecting more selling pressure in the coming session.”

The Dubai index closed at 3,378 points, on top of minor technical support on its uptrend line from November. It is developing a negative 14-week momentum divergence, which suggests the possibility of a sizeable pull-back. Minor supports lie at 3,325 and 3,216 points, the highs in December, but there is no major support before the 2,900-3,000 point area, which was strong resistance between October and early December.

Among the biggest losers on Tuesday was property developer Emaar, which dropped 3.8 percent after saying on Monday it would redeem the $237.5 million outstanding on a convertible bond on Feb. 6. The conversion price will be 4.38 dirhams.

The conversion is expected to dilute the existing share base only marginally. But some investors are still worried about selling of newly received shares from Feb. 6 and so are themselves selling now, said Mohab Maher, a senior sales trader at Mubasher.

Dubai’s pull-back spread to neighbouring Abu Dhabi, which also outperformed the Gulf last year and hit a fresh multi-year high on Monday, but fell 1.4 per cent on Tuesday.

At the same time, investors are eyeing Gulf markets which lagged the regional leaders last year.

“Investors want to reposition themselves,” said Henin. “They have had a very good year in the United Arab Emirates and now they want to allocate some money to Kuwait, where valuations look relatively well now, and Oman, which qualifies as a safe bet and is less volatile.”

Oman’s index gained 0.8 percent and Kuwait’s bourse was up 0.7 per cent.

In Saudi Arabia, retailer Jarir Marketing rose 2.5 per cent after reporting a fourth-quarter profit up 16 per cent, in line with analyst forecasts but exceeding its full-year 2013 growth rate of 14.7 per cent.

PetroRabigh jumped its 10 percent daily limit to 27.5 riyals after HSBC launched coverage of the stock with an overweight rating and a price target of 40 riyals. The stock is still benefiting from December’s decision by PetroRabigh’s parent companies to slash international marketing fees for its products, which could revitalise the firm.

But some heavyweight stocks such as Saudi Basic Industries declined, leaving the overall Saudi index barely changed.