The sharp drop in Wall Street shares has weighed on Saudi banks
SAUDI ARABIA (Reuters) - Saudi shares rebounded on Sunday after a sell-off in the banking sector when banks announced an agreement with the General Authority for Zakat and Income (Zakat) to settle a dispute over the increase in liabilities.
Sentiment in the Gulf was hurt by Wall Street's sharp fall on Friday as global markets were hit by a US government shutdown.
Saudi Arabia's stock index fell more than 2 percent and by 7:30 GMT was down 1.6 percent. However, it reduced the closure losses to 0.3 per cent. Al Rajhi Bank, which lost up to 5.7 per cent in early trading, recovered to close 1.2 per cent.
"Even if banks have deviated from the appropriate provisions for taxes, zakat, which have not been settled, a large amount of cash comes out of the banks' budgets," said Tariq Qaqish, asset manager at Minacorp Financial Services in Dubai.
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"While M & A deals and higher interest rates will improve net interest margins (Bank profitability), one of the main reasons why bank stocks are performing better than the benchmark index, we see downside risks and a natural shift for investors within the sector," he said.
The Saudi-British bank announced a SAR1.6 billion ($ 426 million) settlement with the Saudi authorities, while Al Rajhi Bank said it had settled for 5.4 billion riyals.
There has been a row between banks and authorities since the beginning of the year at least because of additional claims for zakat for years dating back to 2002.
Saudi Basic Industries Corp (SABIC), the kingdom's largest company, rose 0.2 percent to support the market. Zain KSA was among the gainers, up 2.3 percent.
The Dubai index fell 1.2 per cent on the real estate sector. Damac Properties lost 4.5 percent.
Emaar Properties lost 3.8 per cent, while Union Properties fell 5 per cent.
Global stock markets fell on Friday as investor sentiment was affected by a new rise in US borrowing costs.
The Abu Dhabi index fell 0.8 percent on Sunday on energy stocks, after Brent crude lost 2.3 percent to drop to 53.10 dollars on Thursday. Abu Dhabi National Energy Company (TAQA) lost 9.5%.
Qatar's index fell 1.2 per cent, with leading stocks such as Industries Qatar dropping more than 2 per cent.
Shares of Mazaya Qatar Real Estate Development rose 1.6 percent. The company said on Thursday it plans to study the merger with Al Bandari Properties.
In July, Mazaya Qatar said it had decided not to proceed with the acquisition of the Torino management tower in the West Bay area of Doha. Shares of Mazaya Qatar have fallen 12 per cent since the beginning of the year.
Bank Dhofar rose on Sunday after Commercial Bank of Qatar, a major shareholder in National Bank of Oman, said it would not support the merger of the latter with Bank Dhofar. Dhofar was up 3 per cent, while National Bank of Oman was little changed.
Oman's index remained unchanged. National Bank of Oman (NBO) said on Sunday it would take the interests of all shareholders into account when assessing the feasibility of a merger with Bank Dhofar.
Egypt's stock market fell, with Telecom Egypt falling 3.9 percent and Commercial International Bank down 3.4 percent. The benchmark index fell 1.3 per cent.
Following are the closing levels of the Middle East stock market indices:
Saudi Arabia: The index fell 0.3 percent to 7,731 points.
- Dubai: The index fell 1.2 percent to 2479 points.
Abu Dhabi: The index fell 0.8 percent to 4,817 points.
Egypt: The index lost 1.3 percent to 12,964 points.
Qatar: The index dropped 0.8 percent to 10,333 points.
- Kuwait: The index fell 0.2 percent to 5300 points.
- Bahrain: The index remained unchanged at 1314 points.
- Oman: The index remained unchanged at 4336 points.
(USD = 3.7519 SR)