Saudi Arabia’s bourse may stay under pressure on Wednesday as oil prices remain near multi-year lows and investors queue to offload shares in Mobily after the telecommunications operator’s earnings shock.
The Saudi index tumbled 3.5 per cent to 9,785 points on Tuesday, its biggest drop since Oct. 16 and a two-week low. Its next technical support is at the October low of 9,341 points.
Third-quarter earnings season is over so there appears little motivation for traders to bet on a swift rebound, although the market could benefit if some retail investor liquidity from National Commercial Bank’s $6 billion initial public offer starts to return later this week. Asian stocks are lower on Wednesday morning.
Domestically, Saudi traders’ biggest concern is Mobily, which on Monday slashed its profits for 2013 and the first half of 2014 by a combined SAR1.43 billion ($381.2 million), citing accounting errors; it also posted a 71 per cent plunge in third-quarter profit.
Mobily’s shares fell their 10 per cent daily limit to a 21-month low on Tuesday and substantial sell orders were unfilled because of a lack of buyers, pointing to further declines on Wednesday.
Mobily has lost credibility in the eyes of investors and investment banks, said Mohammad Omran, a member of the Saudi Economic Association, especially as the firm also cut its second-quarter profit by SAR339 million after Etihad Atheeb scrapped a deal between the two.
Atheeb instead tied up with former monopoly Saudi Telecom Co (STC), which has turned around its operations after its annual profit slumped to a 10-year low in 2012.
“I think there will be a reallocation of money out of Mobily and into STC – Mobily had been seen as a more quality investment than STC,” said Alhassan Goussous, a Saudi market specialist.
STC’s shares slid 2.4 per cent on Tuesday, outperforming the main share index.
Shares in Kuwait Food Co (Americana) will resume trading following a near two-month suspension, after it repeated on Tuesday that a major shareholder was in preliminary talks with “various parties” to sell its stake in Americana.
Americana said several factors could still prevent a deal and the pricing is not clear, so the stock may not rise in response to acquisition hopes. The shares last traded on Sept. 16; since then, Kuwait’s main stock index has fallen 3.7 per cent.
Egypt’s bourse climbed one per cent to a four-week high of 9,531 points on Wednesday.
That took its gains to 12 per cent since Oct. 19’s three-month low and Cairo could remain bullish after tycoon Nassef Sawiris said his company OCI would make “huge” investments in Egypt following the resolution of a dispute between its subsidiary Orascom Construction Industries and the tax authority.
Egyptian investment company Pioneers Holdings offered to buy 60.2 per cent of Arab Dairy for 56 Egyptian pounds per share, the Egyptian Financial Supervisory Authority said on Tuesday.
That seems unlikely to boost Arab Dairy shares, which last closed at 68.04 pounds, but it is positive for the overall market as it is a fresh sign of reviving M&A interest in Egypt following Abraaj’s bid for Bisco Misr.