PHOTO
* Abu Dhabi falls as most banks retreat
* But NBAD climbs as expected to have upper hand in merger talks
* Saudi land tax moves property-related shares
* Egypt in downtrend due to interest rate rise
* Index breaks below major technical support
By Celine Aswad
DUBAI, June 20 (Reuters) - Stock markets in the Middle East were mixed on Monday as Abu Dhabi's bank-led rally ended and Egypt continued its descent, dragged down by tightening monetary policy.
On Sunday Abu Dhabi's index had surged 4.7 percent as merger talks between National Bank of Abu Dhabi and First Gulf Bank ignited speculation about consolidation in the sector, boosting bank shares. But on Monday the speculation cooled and the index pulled back 1.0 percent.
Shares in FGB retreated 3.4 percent, after an 11.5 percent gain on Sunday. Abu Dhabi Islamic Bank dropped 4.4 percent after rising 4.6 percent on the previous day.
But NBAD's shares continued to climb and added 4.4 percent, taking their gains over two days to 20 percent.
Many investors have been assuming that any share swap in a merger would favour NBAD holders. Arqaam Capital suggested a ratio of 1.15 NBAD for 1 FGB share, though SICO Bahrain estimated 1.4-1.5 shares of NBAD to 1 share of FGB.
"We believe that merger through share-swap agreement between NBAD and FGB is the most realistic option. Without the due-diligence report and other details currently, we have limited information to be conclusive," said SICO.
Meanwhile Dubai's index
.DFMGI
climbed 0.3 percent in low volumes with builder Arabtec , the most traded stock, adding 1.5 percent.
SAUDI ARABIA, EGYPT
Saudi Arabia's index also gained 0.3 percent in modest trading volume. Builder Abdullah Al Khodari advanced 1.2 percent on hopes the construction sector is due for a surge in demand because of the 2.5 percent tax on undeveloped urban commercial and residential land approved by the cabinet late last week.
The tax may push more land out into the market where it can be developed. But companies with large land banks could lose; NCB Capital said in a note that the tax would have a negative impact on Dar Al Arkan , as annual fees on its current land bank would be between 137 million and 160 million riyals ($36.5 million and $42.7 million). The stock fell 0.8 percent.
Egypt's main index came off early lows but closed down 1.8 percent at 7,204 points, breaking technical support on the April and May lows of 7,276-7,327 points. That triggered a complex head & shoulders pattern formed by the highs and lows since March and pointing down to around 6,700 points.
Telecom Egypt (TE) dropped 2.1 percent after the industry's regulator said it was selling 4G licences under a long-awaited plan to reform the sector while letting mobile operators, such as Vodafone Egypt , offer fixed-line services, ending TE's domination of the sector.
A note by Cairo-based Naeem Brokerage said the competition in fixed-line licences could be a cause of concern for Telecom Egypt in the long run as the wholesale business could take a hit. But Naeem continues to rate the stock a "buy". Vodafone Egypt , which could now face more competition in mobile, slumped 7.5 percent.
The entire stock market has been depressed by Thursday's interest rate hike, which surprised most investors, and the benchmark is down 7 percent since June 8. More rate hikes look possible as the central bank battles inflation.
Hani Janeenah, head of research at Cairo-based Beltone Finance, said the Egyptian economy was grappling with a contractionary monetary policy that was confirmed by Thursday's "aggressive" rate hike of 1 percentage point.
MONDAY'S HIGHLIGHTS
ABU DHABI
* The index dropped 1.0 percent to 4,481 points.
DUBAI
* The index added 0.3 percent to 3,306 points.
SAUDI ARABIA
* The index rose 0.3 percent to 6,559 points.
EGYPT
* The index dropped 1.8 percent to 7,204 points.
QATAR
* The index climbed 0.2 percent to 9,825 points.
KUWAIT
* The index edged down 0.5 percent to 5,432 points.
OMAN
* The index lost 0.4 percent to 5,784 points.
BAHRAIN
* The index increased 0.2 percent to 1,115 points.
(Editing by Andrew Torchia) ((celine.aswad@thomsonreuters.com; +971 562 247 653 Reuters Messaging: celine.aswad.thomsonreuters.com@reuters.net))
* But NBAD climbs as expected to have upper hand in merger talks
* Saudi land tax moves property-related shares
* Egypt in downtrend due to interest rate rise
* Index breaks below major technical support
By Celine Aswad
DUBAI, June 20 (Reuters) - Stock markets in the Middle East were mixed on Monday as Abu Dhabi's bank-led rally ended and Egypt continued its descent, dragged down by tightening monetary policy.
On Sunday Abu Dhabi's index
Shares in FGB retreated 3.4 percent, after an 11.5 percent gain on Sunday. Abu Dhabi Islamic Bank
But NBAD's shares continued to climb and added 4.4 percent, taking their gains over two days to 20 percent.
Many investors have been assuming that any share swap in a merger would favour NBAD holders. Arqaam Capital suggested a ratio of 1.15 NBAD for 1 FGB share, though SICO Bahrain estimated 1.4-1.5 shares of NBAD to 1 share of FGB.
"We believe that merger through share-swap agreement between NBAD and FGB is the most realistic option. Without the due-diligence report and other details currently, we have limited information to be conclusive," said SICO.
Meanwhile Dubai's index
SAUDI ARABIA, EGYPT
Saudi Arabia's index
The tax may push more land out into the market where it can be developed. But companies with large land banks could lose; NCB Capital said in a note that the tax would have a negative impact on Dar Al Arkan
Egypt's main index
Telecom Egypt
A note by Cairo-based Naeem Brokerage said the competition in fixed-line licences could be a cause of concern for Telecom Egypt in the long run as the wholesale business could take a hit. But Naeem continues to rate the stock a "buy". Vodafone Egypt
The entire stock market has been depressed by Thursday's interest rate hike, which surprised most investors, and the benchmark is down 7 percent since June 8. More rate hikes look possible as the central bank battles inflation.
Hani Janeenah, head of research at Cairo-based Beltone Finance, said the Egyptian economy was grappling with a contractionary monetary policy that was confirmed by Thursday's "aggressive" rate hike of 1 percentage point.
MONDAY'S HIGHLIGHTS
ABU DHABI
* The index
DUBAI
* The index
SAUDI ARABIA
* The index
EGYPT
* The index
QATAR
* The index
KUWAIT
* The index
OMAN
* The index
BAHRAIN
* The index
(Editing by Andrew Torchia) ((celine.aswad@thomsonreuters.com; +971 562 247 653 Reuters Messaging: celine.aswad.thomsonreuters.com@reuters.net))