Saudi Electric seen buoyant in Mideast trading

Saudi Electricity Co (SEC) may extend gains on Tuesday as investors bet its infrastructure expansion will lead to increased profits, but regional sentiment is likely to be weakened by declines in oil prices and world stocks.

Saudi Electricity Co made its largest gain for a month on Monday after it approved the award of $3.9 billion of new power projects, while Saudi Cable Co and Middle East Specialised Cables Co added 3.2 and 1.7 per cent respectively on expectations they would benefit from the utility's expansion plan.

"If SEC wants to expand its grid, then it's going to have to work with these two companies," says a Riyadh-based institutional trader who asked not to be identified.

Saudi Arabian Mining Co (Maaden), which also produces fertilizer, is back on investors' shopping lists after BHP Billiton launched a hostile bid for Canada's Potash Corp, mirroring gains in other fertiliser manufacturers across the globe.

BHP offered $130 a share, which Potash has rejected and the Canadian firm says it is talking to other potential suitors. Potash's shares have jumped 34 per cent to $150.20 since BHP's bid last week.

"Potash and Maaden both produce phosphate, so investors are thinking Maaden is undervalued and could have further to rise," says the trader. "Maaden is now approaching its IPO price of 20 riyals, which will be a tough psychological level to break. It's a good company and back in the spotlight for the right reasons." Maaden ended Monday at 19.95 riyals.

Yet upbeat sentiment on Maaden and SEC is unlikely to arrest Saudi Arabia's decline, with the index down 3.6 per cent since August 2.

"In normal times, these would be enough to lift the Saudi market, but most investors are retail traders and they aren't waking up until 1 or 2pm during Ramadan, so they don't care about the market right now," adds the trader.

Dubai's index edged past important psychological resistance at 1,500 points on Monday and Marwan Shurrab, vice-president and chief trader at Gulfmena Alternative Investments, see further limited upside.

"Turnover is still very low, but Dubai looks like it is heading towards its next resistance level at 1,560 points," says Shurrab. "We're taking our cue from international markets - Dubai was able to move up after a positive opening in Europe."

Asian stocks are down on Tuesday, with Japan's Nikkei index dipping below a key support level as investors fret about an anaemic global recovery.

Crude is down 0.4 per cent at $72.78 a barrel, declining for a fifth day.