Markets buck global gains; local traders wary

By Matt Smith

DUBAI (BestGrowthStock) – Most Middle East markets fell on Wednesday, bucking gains on emerging and global bourses as local investors waited for international funds to return to the region.

“We have underperformed for the past few weeks and tend to be correlated more to the downside for both oil and global markets,” said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.

“It seems local investors are waiting for internationals to come in lead the market up. Developed and emerging markets are doing well, so internationals don’t have a shortage of places to put their cash, but with MENA (Middle East and North Africa) underperforming they should return sometime and locals don’t want to risk buying too early.”

World and emerging equities hit a two-year high as investors anticipated more U.S. monetary easing would support its economy, while oil reached a six-month peak. (MKTS/GLOB: ) (O/R: )

The U.S. Federal Reserve is expected to resume purchases of longer-term treasuries, with economists forecasting it will spend around $500 billion over six months.

“The Fed will print more money to buy assets and so we should see a decline in the dollar in the long term,” said Hesham Tuffaha, Bakheet Investment Group head of research in Riyadh. “It will be very risky to be in cash — if you are not putting your money into equities, bonds, commodities or oil, for example, then you lose as the dollar debases.”

Saudi Arabia’s index (.TASI: ) fell 0.5 percent, its first decline for five sessions and Tuffaha urged investors to be cautious, despite possible asset appreciation globally as the Fed program kicks in.

“The overall market is over-valued because of some large-cap companies that are still suffering losses or lower profits, which has raised the overall PE (price to earnings ratio), so investors should stay away from these names and focus on companies showing earnings growth,” said Tuffaha.

He named petrochemicals, building and construction, agriculture and telecoms as attractive, plus select banks.

In Abu Dhabi, Emirates Telecommunications Corp (ETEL.AD: ) (Etisalat) ended flat, having slipped to a three-week intraday low, as it prepared to start due diligence to buy a controlling stake in Kuwaiti rival Zain (ZAIN.KW: ).

Etisalat later said the deal was unlikely to be concluded before the end of the first quarter of 2011.

Zain fell 1.4 percent, trimming its gains to 11.1 percent since the sale, brokered by major shareholder Kharafi group, was announced in late September.

Abu Dhabi’s (.ADI: ) index slumped to a two-week low and Dubai (.DFMGI: ) fell for a second day.

“Q3 earnings are out and we didn’t see exceptional results, apart from maybe in Qatar – for Saudi, the UAE and Oman the numbers have mostly come in line or below expectations,” said Adel Nasr, United Securities brokerage manager.

“So there’s not much motivation to get into the market, although if oil prices go up, our equity markets should continue to do well. Such a move wouldn’t be supported by financial results, however, so we’ll be vulnerable to any negative sentiment from global markets.”

(Editing by Firouz Sedarat)

Markets buck global gains; local traders wary