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Kuwait bourse up, bid talk fuels MTC and CBK rally

Saudi Arabia’s benchmark extended declines into a second trading day as investors sold shares to buy into the initial public offering of Kayan Petrochemical Co., and one analyst said he expected a further drop before the offering closes on Monday.

The Kuwaiti index .KWSE, the biggest gainer in the Gulf Arab region this year after rallying more than 8.7 percent, rose 0.81 percent to 10,933.90 points.

Commercial Bank, Kuwait’s third-largest lender by market value, jumped to an all-time closing high on a report in al-Qabas daily on Saturday that Qatar National Bank QNBK.QA was in talks with the Kuwaiti bank about buying a stake.

The stock jumped 5.41 percent to 1.560 dinars ($5.40), the biggest gainers among the 10 largest stocks. Al-Qabas said the suitor may pay 2 dinars per share.

“The market is expecting that the investor will buy a stake at a premium to the share price. That is why they are buying,” said Talal al-Tawari, head of the GCC equities division at Gulf Investment Corp.

Shares of the bank have rallied 20 percent since April 10, when Commercial Bank’s chairman told Reuters the lender was considering merger, takeover and other approaches from foreign and local investors.

MTC, the second-largest Arab telecom firm by market value, also rose to a record close for a fourth trading day in buying fuelled by rumours that a regional investor could pay a ”substantial premium” to its share price for a stake, Tawari said.

“There is a lot of speculation on the stock. Everyone is jumping on it because there is a rumour that some party is looking to acquire a stake at a higher price,” Tawari said, declining to comment on how high the price might be.

MTC, which is up more than 73 percent this year, trades at 22-23 times expected 2007 earnings, Tawari said.

Kayan drains liquidity

Saudi Arabia’s index .SASI became the Gulf’s worst-performing benchmark this year, down 7.6 percent, after sliding 2.73 percent to 7,327.45 points.

Saudi Basic Industries Corp. 2010.SE and Saudi Telecom Co. 7010.SE, the two largest firms by market value, fell 3.23 percent and 4.24 percent, respectively.

Investors are liquidating shareholdings to buy IPO shares of Kayan, which were only 18 percent subscribed in their first week, according to newspaper reports.

“You will see a good amount of money leaving the market because of the IPO,” said Youssef Kassantini, chief executive at Bourse Experts, a Riyadh-based stock market consultancy.

Investors are hoping to get good allocations of IPO shares given the 20-million-share limit set for any single investor, Kassantini said.

“The correction should become steeper tomorrow and after tomorrow as more liquidity comes out of the market,” Kassantini said.

Markets in Dubai, Abu Dhabi, Qatar, Bahrain and Oman are closed on Saturdays.