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Kuwait stocks at 15-mth high after FX policy shift

DUBAI - Kuwait’s bourse rose to a 14-1/2-month high on Tuesday as its rally gained more momentum from investor expectations that the dinar will rise after the central bank abandoned its peg to the dollar.

Saudi Arabia’s bourse, the largest among Arab countries, was the only Gulf benchmark to fall, snapping a 10-day rally after Saudi Basic Industries Corp. 2010.SE (SABIC) on Monday won the bid for General Electric Co.’s GE.N plastics business.

Kuwait unshackled its dinar from the tumbling US dollar on Sunday and switched the exchange rate mechanism to a basket of currencies, a move that would help boost the best-performing index in the Gulf Arab region, analysts said.

The benchmark .KWSE, rising for a fifth trading day, climbed 0.78 percent to 11.298.30 points, its highest close since March 4, 2006.

“There is a great expectation that the dinar will go stronger. Stocks are one avenue for international investors to take advantage of Kuwait dinar appreciation,” said Talal al-Tawari, head of the GCC equities division at Kuwait-based Gulf Investment Corp.

Telecom and banking stocks led the gains, with shares in Mobile Telecommunications Co., the second-largest Gulf Arab telecom company by market value, rising 100 fils ($0.34), or 2.45 percent, the maximum allowed in a single day.

Kuwait Finance House the second-largest lender by market value, also jumped by the 100 fils daily trading limit, or 4.07 percent.

“Investor confidence in the Kuwait market is high. There are a lot of institutions wanting to get into this market,” said Jassem al-Zeraei, a trader at the National Bank of Kuwait.

A currency policy that would curb inflation reinforces strong corporate earnings growth and global expansion plans of companies including MTC, said Rami Sidani, senior associate of asset management at Dubai-based investment bank Shuaa Capital.

“The Kuwait stock market has been very strong this year. The currency shift will play a big role in encouraging people to have move investments in the Kuwait dinar,” he said.

SABIC weighs

Saudi Arabia’s stock index .SASI snapped a 10-day rally paced by SABIC, the world’s largest chemicals company by market value.

SABIC had gained 4.13 percent in the three trading days prior to General Electric Co. GE.N saying on Monday it would sell its plastics business to SABIC for $11.6 billion.

The stock fell 2.49 percent, pulling the index down 0.82 percent to 7,720.96 points.

“The stock had rallied on rumours and now investors are selling on fact,” said Marwan Shurrab, a senior trader at Shuaa Capital.

“This is just a short-term correction. The index has already broken its downtrend,” he continued, putting the upside target for the index at 8,300 points.

Markets in Dubai and Qatar .QSI regained ground after falling on Monday, while continued bid talk on Ahli United Bank, Bahrain’s largest lender by market value, lifted the bourse .BAX for a fifth trading day.

The stock, which has rallied almost 23 percent since a Kuwaiti newspaper reported on Saturday that an investor was in talks to buy a majority stake, closed up 3.94 percent.

Bahrain’s index climbed 0.61 percent to 2,262.59 points. It had posted its biggest one-day rise in more than nine months on Monday.

“What’s driving Ahli United is the rumour that a large investor is interested in buying a majority stake at a steep premium,” said Zeraei. The stock also surged 6.85 percent in Kuwait and 3.94 percent in Bahrain.

Abu Dhabi’s stock index .ADI also edged higher for a third day and Oman’s .MSI closed at another record high, up 0.53 percent at 6,074.70 points.

Buying in Muscat mainly targeted Oman Telecommunications Co. (Omantel), which trades at less than 10 times expected 2007 earnings, said Adel Nasr, a broker at Muscat-based United Securities. The stock clocked up 2.71 percent.

“Institutional investors have been moving in,” he said.