DUBAI: Middle East markets will grapple with divergent catalysts next week, from positive bank results in the UAE to court cases that are causing jitters in Egypt.
The earnings news in the United Arab Emirates — led by a trio of major banks — is expected to drive markets higher after a recent consolidation period.
"We have seen some pretty good figures … the macro economic factors in terms of increased liquidity and lower borrowing rates are giving positive signs to the market," said Samer Al-Jaouni, general manager at Middle East Financial Brokerage.
Abu Dhabi Commercial Bank’s first quarter profit more than doubled while Emirates NBD saw a 27 percent jump in quarterly profit. Abu Dhabi Islamic Bank’s profit rose 3 percent.
Earnings from the property sector, one of the UAE’s biggest sectors, could put a damper on gains. Traders are adopting a cautious stance on the sector.
Emaar Properties, the UAE’s largest developer by market value, posted a 42 percent drop in net profit last Sunday, missing forecasts.
But its operational profit was strong, signaling recovery in the market, according to traders.
"There is still a clear gap between demand and supply in the property sector but whenever bank lending returns, people will invest in the market," Jaouni said.
Other property firms, unlike Emaar which also relies on revenues from its hospitality and retail operations, will provide a better gauge of the sector’s recovery, traders said.
In Saudi Arabia, the Arab world’s largest bourse, petrochemicals are expected to drive the index in the wake of strong earnings and high commodity prices.
"What we saw in the first-quarter justifies the Saudi market recovering the full gap when they had fallen during the political unrest," said a Riyadh-based trader. "Overall the higher energy prices contributed very positively to results and set into the market immediately. That has set the tone."
The banking sector will also be in focus as the impact of the Saudi king’s $93 billion in social handouts begins to be felt.
"Banks should take the lead soon — government funds should start to feed into the bottom line," the trader said. "We’re seeing a lot of switching already."
Egypt court shivers
Real estate cases troubling Egypt’s market will keep investors cautious and on the sidelines as the new government attempts to stamp out corruption that thrived under the administration of ousted president Hosni Mubarak.
Egyptian real estate stocks have tumbled this year amid turmoil and investigations of state land sales that took place on the watch of the autocratic Mubarak.
The country’s second-biggest listed developer Palm Hills Development Co appears to be under pressure after an Egyptian court ruled on Tuesday that a sale of state land to the developer was illegal and scrapped it.
The court will also hear a similar case against Talaat Moustafa Group for a $3 billion government project that may be scrapped.
The firm had signed a new contract last November with the cabinet in an attempt to end a legal row which has rumbled since June and unnerved investors in Egypt’s property sector.
"People are worried about these rulings coming out, about the way decisions are being made. It’s not creating a positive attitude towards investing," said Hashem Ghoneim, vice president at Pyramids Capital.
"Sentiment is also damaged because of the way decisions are being made — they are very quick and very harsh. It’s happening in the real estate sector but people might be worried that it might spill into other sectors."
He said investors should wait out the situation in case of any new regulations. "Investors need to be reassured that everything will return to normal and that this is just about a few companies and then it’ll be over," Ghoneim said. –Additional reporting by Thomas Pfeiffer in Cairo