August 4, 2019 / 12:39 PM / 4 months ago

MIDEAST STOCKS-Weighed down by bank stocks, Saudi market dips after U.S. rate cut

    * Most Saudi banks fall, weighing on the Tadawul index
    * Banks also fall as Binladin Group seeks adviser for financial
    * Dubai's Emaar Properties declines amid correction after MOU with Chinese

    By Hadeel Al Sayegh
    Aug 4 (Reuters) - Saudi Arabian equities declined on Sunday, weighed down by
banking shares, in line with major markets on Friday after the U.S. Federal
Reserve cut interest rates, which was followed by rate cuts by most Gulf central
    "Global factors such as Fed's rate cut and trade concerns post Trump's
tweets on possible 10% tariff on additional goods are likely the reasons [behind
the weakness]," said Pritish K. Devassy, head of equity research at Al Rajhi
    "The Fed’s cut affects Saudi banks as net interest margins decline while
more tariffs imply global demand weakness which is negative for petrochemical
prices. Given these two sectors constitute a large chunk of the Saudi Index, the
indices have declined," Devassy said.
    The Saudi market was also taking cues from a fall in U.S. markets on Friday,
"as well as a net decline in international oil prices over the last two trading
sessions," said Muhammad Faisal Potrik, head of research at Riyad Capital.
    Saudi banking stocks were also hit by news that Saudi Binladin Group (SBG)
was seeking a financial adviser for restructuring of its debt which could range
between $20-$30 billion.
    Goldman Sachs said in a report to clients it was "getting questions on the
exposure of Saudi banks to Saudi Binladin Group". 
    "Given SBG's dominant position in the Saudi contracting space for many
years, the exposure could be material in our view," the report dated Aug. 2
    The Tadawul All-Share index closed down 1.3% on Sunday.
    National Commercial Bank, the country's largest lender, was down
2.9%. Al Rajhi Bank, the country's biggest Islamic lender, was down
    Riyad Bank, Samba Financial Group, and Saudi British
Bank were down 2.5%, 3.7% and 3.2% respectively.
    The U.S. Federal Reserve cut interest rates on Wednesday night by 25 basis
points but, significantly, signalled the move may not mark the beginning of a
long easing cycle.
    Central banks in Saudi Arabia, the United Arab Emirates and Qatar followed
the move, cutting their rates by the same margin. Their currencies are pegged to
the U.S. dollar and they follow the Fed on interest rate moves.
    In Abu Dhabi, the index declined 1%, dragged lower by the market
heavyweight lender First Abu Dhabi Bank, which was down 1.4%.
    Qatar's index fell 0.4% with the Gulf's biggest lender Qatar National
Bank shedding 0.8% and Qatar Navigation losing 3.8%.
    Dubai's index was also down 1.5% with the emirate's biggest
developer Emaar Properties down 4%. Emaar Development, a unit of Emaar
Properties, was down 3.6 percent. 
    It's a "typical correction," said Issam Kassabeih, senior financial analyst
at Menacorp. 
    Shares of Emaar Properties initially rose, Kassabeih said, after the
developer said it signed an agreement with Beijing New Aeropolis Holdings to
jointly develop a project around China's Beijing Daxing International Airport.
    "But the clarifications provided thereafter emphasized the MOU is not an
obligation and does not guarantee any revenue," Kassabeih said.
    After the market close, Emaar reported a 3.7% decline in net profit for the
first half of the year. Profit was 3.11 billion dirhams, versus 3.23 billion
dirhams in the year earlier period.
    Outside the Gulf, Egypt's blue-chip index defied the downward trend
 and closed 0.8% higher. Its largest lender Commercial International Bank
 acted as the biggest boost for the index, rising 1.6%. 

 SAUDI       The index         was down 1.3% to 8,558 points
 ABU DHABI   The index        lost 1% to 5,179 points
 DUBAI       The index          fell 1.5% to 2,857 points
 QATAR       The index        dropped 0.4% to 10,356 points
 EGYPT       The index          rose 0.8% to 13,632 points
 BAHRAIN     The index        was flat at 1,549 points
 OMAN        The index        was flat at  3,780 points
 KUWAIT      The index        lost 0.4% to 6,726 points

 (Reporting by Hadeel Al Sayegh; editing by David Evans)
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