DUBAI, Oct 20 (Reuters) - Saudi Arabia’s stock market was soft in early trade on Tuesday in response to weak oil prices, while real estate stocks, seen as a hedge against currency depreciation, boosted Egypt.
Brent crude sank nearly 4 percent overnight and remained under pressure in Asian trade on Tuesday. This helped to push the Saudi stock index down 0.3 percent in the opening minutes.
Some shares tumbled in response to poor third-quarter earnings, with Saudi International Petrochemical Co (Sipchem) down 6.1 percent after it reported a 55.4 percent slump in net profit to 71.6 million riyals ($19.1 million). Analysts had forecast 122.9 million riyals.
Mouwasat Medical Services, one of Saudi Arabia’s largest listed healthcare providers, dropped 2.2 percent after reporting a 40.3 percent fall in profit to 43 million riyals; analysts had forecast 64 million riyals.
Savola Group, Saudi Arabia’s largest food products company, slipped 1.7 percent after reporting a 47 percent fall in profit to 371.6 million riyals; analysts had forecast on average 411 million riyals. The company also cut its third-quarter dividend.
However, real estate shares reacted calmly to news that the cabinet had submitted a proposal to the advisory Shura Council to impose a fee of up to 100 riyals per square metre on undeveloped land. The council is expected to complete its study of the proposal within 30 days, though it is not clear when the tax would actually be imposed.
The stock market’s property sector index dropped about 10 percent in late March after the cabinet decided in principle to impose such a tax, because of a belief that the value of real estate developers’ land banks would shrink.
However, real estate blue chip Dar Al Arkan was down only 0.7 percent on Tuesday, suggesting investors have now largely factored in the expected tax.
Egypt’s stock index rose 1.2 percent as property developer Emaar Misr climbed 4.4 percent and another stock in the sector, Talat Mostafa, added 1.7 percent.
Since last week the central bank has been allowing the pound to edge down against the U.S. dollar in the official market, apparently launching another period of managed depreciation.
Property firms are seen as possible beneficiaries because Egyptians may buy real estate to hedge against a weak currency while foreign investors may be attracted to the sector by lower prices in foreign currency terms. (Reporting by Andrew Torchia; Editing by Hugh Lawson)