Saudi stocks likely to ride out Iran tensions; Egypt vulnerable

Saudi Arabia's stock market is likely to be largely unaffected by geopolitical tensions with Iran next week and to focus instead on petrochemical companies which are due to announce quarterly earnings, analysts said.

Washington's accusation that Iran backed a plot to kill the Saudi ambassador to the United States has the potential to hurt markets. But Saudi stocks did not react to it on Wednesday and may not do so unless outright conflict looks likely.

"At this time it's not a concern, it's only an accusation. Right now markets are being driven by fundamental factors like earnings and (economic) uncertainty in Europe and the US," said Youssef Kassantini, a Saudi-based financial analyst.

Egypt's market, down 43.3 percent this year, will remain vulnerable to political instability and any further violent unrest after clashes on Sunday night between the army and Christian protesters in Cairo left at least 25 people dead.

But a sharp rebound of the index off an intra-day low of 3,820 points in the past three days, to a close of 4,152 on Thursday, suggests the market may have found a fairly solid bottom because of cheap valuations.

The 3,380-point level, a multi-year low hit in early 2009, is seen by many traders as strong chart support.

"What we have now is not heavy selling but a lack of buyers. Stocks are attractive in the long term but in the short term we're going to be in an extremely tight range," said a foreign sales trader at CIBC in Cairo.

He forecast the index would remain in a range of 3,800 to 4,200 points for some time, possibly falling as far as 3,400 before foreign investors returned in significant numbers.