August 28, 2019 / 1:27 PM / 3 months ago

MIDEAST STOCKS-Saudi stocks slide as funds turn bearish

    * All Saudi banks fall
    * Egypt hits 4-month high
    * Financials boost Egypt
    * Emaar aids Dubai

    By Ateeq Shariff
    Aug 28 (Reuters) - Saudi Arabia's stock market fell sharply
on Wednesday with all its banking shares dropping as receding
fund inflows dampened  investor appetite on a day when second
phase of Saudi stocks joined the MSCI emerging markets index.
    EFG Hermes said in a note on Wednesday the investment case
for Saudi banks is no longer 'compelling' in their view on the
backdrop of receding passive flows, rates becoming a headwind,
and the emergence of credit quality concerns.
    "We think Saudi can drift lower, before finding a support
above the 8k mark. Stock picking would be the name of the game
hereon and companies that deliver good results shall outperform
the broader Index," said Vrajesh Bhandari, senior portfolio
manager at Al Mal Capital.
    Sixty percent of fund mangers said they would decrease their
investments in Saudi Arabia, displaying bearishness that has
carried over from last month.
    The Saudi index declined 1.4% with Al Rajhi Bank
 losing 2% and the country's largest lender National
Commercial Bank decreasing 2.4%.
    A second batch of Saudi shares was added to the MSCI
emerging markets index on Wednesday after the country's stocks
were first included in the index in May.
    "Saudi Arabia has attracted $18 billion in foreign portfolio
equity inflows so far this year, as foreign investors have
significantly increased their exposure to Saudi equities ahead
of upgrade," the Institute Of International Finance (IIF) said
in a note.
    IIF added that inflows to Saudi Arabia would have been even
higher if not for concerns about global trade and the escalation
of regional tensions.
    Egypt's blue-chip index surged 2.2%, to reach its
highest level since May, as most of its shares traded in green
territory. Commercial International Bank jumped 4.3%
and EFG Hermes was up 6.3%.
    Middle Eastern funds plan to increase their investments in
Egypt and UAE and decrease allocations in Saudi Arabia, while
keeping their exposure to other countries in the region at
current levels, according to a Reuters poll.
    In Dubai, the index added 0.2% with blue-chip
developer Emaar Properties increasing 1%.
    Qatari index and Abu Dhabi's index traded
flat. In the previous session the duo had risen 2.5% and 2.7%
    "It is interesting that both UAE & Qatar saw net foreign
inflows yesterday, when the MSCI rebalancing lowered the weights
of these markets," Bhandari said.

 SAUDI ARABIA  The index         dropped 1.4% to 8,171 points
 ABU DHABI     The index        was flat at 5,129 points
 DUBAI         The index          rose 0.2% to 2,758 points
 QATAR         The index        traded flat at 10,025 points
 EGYPT         The index          up 2.2% to 14,596 points
 BAHRAIN       The index        lost 0.2% to 1,534 points
 OMAN          The index        gained 0.5% to 3,973 points
 KUWAIT        The index        was up 0.2% at 6,542 points
 (Reporting by Ateeq Shariff in Bengaluru
Editing by Frances Kerry)
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