Banking stocks helped Saudi Arabia’s index rebound from a two-week low yesterday after the government ended builder Saudi Binladin Group’s ban on bidding for state contracts, potentially easing the strain on a company heavily in debt to local lenders.
Binladin, which was barred from new government contracts last September after a deadly crane accident in Mecca, has now received a royal decree permitting it to bid for state contracts again, a Binladin executive told Reuters, declining to be named because of briefing rules.
A travel ban imposed on the company’s top managers has also been lifted, the executive said.
National Commercial Bank and Al Rajhi Bank were among the biggest gainers, rising 1.6% and 1.3% respectively.
“Binladin is a big borrower and worries about the company had been pressuring the banking sector,” said Mazen al-Sudairi of Riyadh-based Al Istithmar Capital. “There is less risk associated with Binladin now.”
The banking sector index, which represents about a third of the bourse’s total market capitalisation, rose 1.3%.
Binladin, one of the Middle East’s largest construction companies, has declined to describe its financial situation publicly, but Gulf bankers have said it is believed to owe local and international banks about $30bn.
Overall, the building and construction sector accounts for 7.9% of total lending among Saudi banks, central bank data shows.
Saudi’s main index rose 1.1%, its first gain in six sessions trimming losses since hitting a 16-week high on April 25 to 3.1%.
The petrochemical sector, the bourse’s second-largest behind banking, was also supportive. It rose 2.4% as Brent crude oil jumped 3.5% to $46.16. Brent is up by nearly two thirds since January’s 12-year low.
In Egypt, Cairo’s benchmark index rose 1.4%, rallying from a three-week low as telecoms stocks helped to end a four-session losing streak.
Investors had sold off stocks ahead of a four-day holiday last weekend and the trend continued after the market reopened on Tuesday.
“We’re seeing a rebound as bargain hunters come in to take advantage of lower prices,” said Mohamed Radwan, head of equities at Pharos Securities in Cairo. He predicted the recovery will be short-lived, with the bourse likely to remain volatile. It is up 15% since mid-March’s devaluation of the Egyptian pound. Global Telecom and Telecom Egypt climbed 1.5% and 2.7% respectively.
Other Gulf markets were closed for a religious holiday.
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