Mideast markets buoyant as confidence rises

Middle East markets are seen extending gains on Monday as regional rally gathers pace following an upbeat start to the Asian week, although Saudi stocks may come under pressure on the final day's trading before an extended holiday.

Qatar ended Sunday at a 17-week high, Dubai made its largest gain since late June and although Saudi Arabia fell, it was only by 0.1 per cent, holding onto the bulk of Saturday's four-week peak.

"There's a very good chance these gains will be sustained for the next few days going into Eid and we could be seeing the start of a short-term rally," says Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

"In Dubai, Emaar will lead the picture because it is the market proxy and fundamentally it's the cheapest and strongest stock."

Beyond intangible indicators like sentiment pointing to further gains, there is also empirical evidence that investors are getting braver.

"US treasury yields spiked late last week, which shows risk appetite is increasing and if US markets can deliver a couple more days of positive performance it will bode very well for Middle East markets," says Riyadh-based trader who asked not to be identified.

US treasuries are seen as the ultimate safe haven other than cash and so if yields are going up, prices are decreasing, which shows investors are selling up to buy into riskier assets.

"Ramadan is coming to an end, as is summer, with people soon returning to work and likely to put money back into the market," the Riyadh trader says.

Increasing talk of a market rally means investors should look at high beta and cyclical names, he adds.

Hesham Tuffaha, Bakheet Investment Group head of research, offers a similar outlook, forecasting further gains in petrochemical stocks after product prices rose 6-7 per cent in the past three weeks.

"Q3 average prices are still below Q2, but oil holding above $70 should push investors to get back into the market," Tuffaha adds.

Saudi stocks may come under selling pressure on Monday, the last day's trade before a week-long holiday to mark Eid Al Fitr.

Asian stocks touched one-month highs on Monday after the latest US jobs data eased fears of a second recession in the world's biggest economy was high.

This increased optimism could boost regional transport stocks such as Qatar Gas Transport Co (Nakilat) and National Shipping Co of Saudi Arabia, traders say.