January 12, 2017 / 5:47 AM / 7 months ago

MIDEAST STOCKS-Rebound in oil prices may buoy Gulf

DUBAI, Jan 12 (Reuters) - Gulf stock markets may be firm on Thursday after oil prices bounced overnight, while smaller stocks may continue to dominate activity in Dubai as the market waits for fourth-quarter earnings.

Brent oil futures rebounded sharply on Wednesday, jumping 2.7 percent to $55.10 a barrel. This could encourage some buying-back of Saudi petrochemical shares, although many fund managers believe Saudi valuations are not cheap after the stock market's surge since October.

The Saudi index closed at 6,895 points on Wednesday, falling below technical support at the mid-December low of 7,002 points. Another straight close below support would confirm a break, triggering a double top formed by the December and January peaks and pointing down to around 6,770 points.

In Dubai, the index is up 2.6 percent since the start of the week and may continue to find support from finance and insurance shares, which have been volatile since the start of the year on speculation the industry may see further tie-ups after the impending merger of National Bank of Abu Dhabi and First Gulf Bank.

"Blue chips have taken the back seat, and trade has been focused on rotating between the smaller shares. This will likely continue until fourth-quarter earnings," said a Dubai-based stock broker. (Reporting by Celine Aswad; Editing by Andrew Torchia)

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