End Of Yemen Campaign May Boost Markets

Saudi Arabia’s decision to end a campaign of air strikes against Yemen’s Houthi rebels may support equities in the kingdom and across much of the Middle East on Wednesday.

Riyadh announced late on Tuesday it was ending a month-long offensive against the Houthis, who seized large areas of Yemen, and said it would back a political solution to bring peace to its war-ravaged neighbour.

The Yemen fighting was never a big concern for financial markets, which believed the Gulf states could prevent the conflict from spreading beyond Yemen’s borders; bond yields and credit default swaps barely moved in response to the violence.

Nevertheless, the fighting did unsettle some investors in the Gulf and Egypt, and stock markets across the region fell by several percent after the military campaign began. Its completion may help to reverse those losses.
Corporate earnings in Saudi Arabia reported since Tuesday’s close have been mixed. Saudi Electricity Co (SEC), the Gulf’s largest utility firm, reported its net loss for the first quarter more than doubled to 1.94 billion riyals ($517.4 million). This was much worse than NCB Capital’s forecast of a net loss of 1.27 billion riyals.

But telecommunications operator Zain Saudi’s first-quarter loss narrowed to 257 million riyals from 318 million riyals a year earlier. Two analysts surveyed by Reuters had forecast Zain Saudi would post losses of 270.1 million riyals and 289.4 million riyals.

The main Saudi index last closed at 9,559 points; it faces major technical resistance in the 9,572-9,745 point area, where the 200-day average roughly coincides with the March peak, and has been struggling in that area for three days.

Elsewhere in the Gulf, Dubai lender Emirates NBD may gain after it posted a 60 percent rise in first-quarter net profit, well ahead of analysts’ forecasts. However, the stock lacks liquidity, making trade in it choppy.

Property developer DAMAC reported a 38 percent fall in first-quarter net profit on Wednesday despite surging revenue, because a year earlier its bottom line had benefited from a big one-off gain from an associate.

But the company also said it would pay at least 25 percent of its capital in cash dividends in 2015 and the same ratio in 2016. For 2014, it only offered a bonus share issue.

Retail-focused start-up firm Marka may attract investors after saying it bought a majority stake in Cheeky Monkeys, a chain of children’s entertainment and education centres.

Dubai’s index, supported by a surge in liquidity in recent days, last closed up 0.7 percent at 4,123 points; it is approaching majaor resistance on its 200-day average, now at 4,261 points. It has not traded above that level on a sustained basis since last October.

On global markets, Asia-Pacific equities are mixed on Wednesday, while Brent oil has edged down 0.4 percent to $61.64 per barrel.

Source: Reuters