Gulf stocks weaken in early trade

Stock markets in the Gulf edged down in early trade on Wednesday with Saudi Arabia’s blue-chip food and telecommunications shares selling off after posting mixed earnings.

Riyadh’s main index was down 0.1 per cent in the first hour of trade.

Savola Group slumped 7.8 per cent to 38.80 Saudi riyals after the largest food company in the Gulf reported an 80.3 per cent drop in first-quarter net profit, missing analysts’ forecasts.

The board approved a cash distribution of 0.25 riyal per share for the first quarter, lower than 0.5 riyal in the same period last year, according to Reuters data. The food and agriculture sub-index fell 3.1 per cent.

The telecommunications sub-index dropped 1.9 per cent after the top two companies reported earnings late on Tuesday. Etihad Etisalat (Mobily) dropped 5.6 per cent despite swinging to a first-quarter profit of 16.6m riyals compared to a loss of 44.5m riyals in the prior-year first quarter.

Analysts at NCB Capital had forecast it would make a net profit of 201.1 million riyals for the period, but EFG Hermes had expected a net loss of 4.59 million riyals.

“Mobily, which stopped distributing dividends in the third quarter of 2014, has not yet announced plans to increase shareholder value through cash outlays, and this could have disappointed investors,” said a Jeddah-based equity analyst.

Saudi Telecom was down 0.4 per cent after the company missed analysts’ forecasts. Net profit for the first quarter dropped 5.2 per cent because of rising costs; the firm made a profit of 2.38 billion riyals compared to analysts’ average expectation of 2.5bn riyals.

But petrochemical shares outperformed with bellwether Saudi Basic Industries, which reported better-than-expected earnings on Monday, adding 0.6 per cent.

In the United Arab Emirates the two main indexes were down. Abu Dhabi fell 0.6 per cent as Abu Dhabi Islamic Bank slumped 6.5 per cent. It had surged 9.5 per cent on Tuesday after Bloomberg reported ADIB planned to open its shares to foreign ownership, but after the market close, the bank issued a statement saying it had no such plan.

Other large-cap banks were also sold with Abu Dhabi Commercial Bank, which has yet to report earnings, falling 1.3 per cent.

Dubai’s stock index shed 0.3 per cent, weighed down by a 1.2 per cent drop in Emirates NBD. On Tuesday Dubai’s largest lender said it had laid off around 300 people in recent weeks at two subsidiaries as it seeks to cope with a weaker economy. ENBD reported a first-quarter net profit of Dh1.81 billion, up 8 per cent from the same period a year earlier.

But builder Arabtec was up 2.3 per cent ahead of its shareholder meeting later in the afternoon.

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