PHOTO
DUBAI, June 19 (Reuters) - Stock markets in the Gulf may be buoyed on Sunday by a rare burst of mergers and acquisitions activity, while a larger-than-expected interest rate hike could weigh on Egypt.
MSCI's all-country world stock index
.MIWD00000PUS
ended Friday up 0.5 percent while Brent oil
LCOc1
rose back above $49.0 a barrel as jitters over this week's referendum on Britain leaving the European Union eased slightly, though the outcome of the vote remains very much in doubt.
ID:nL1N1991T9
National Bank of Abu Dhabi
NBAD.AD
and First Gulf Bank
FGB.AD
have held preliminary talks on a merger, two sources with knowledge of the matter told Reuters on Thursday, in what would create the largest bank by assets in the Middle East and Africa.
ID:nL8N1983AM
JPMorgan Cazenove said in a report that it was too early to take positions in either stock since "visibility remains low as yet on factors like strategic rationale for undertaking the transaction from both sides, the form and timeline that this transaction could take and the size of synergies".
But local investors may nevertheless welcome the idea of an Abu Dhabi banking champion.
"We see strong merits of this potential transaction for both parties," said Arqaam Capital, adding that FGB would benefit from a stronger wholesale banking proposition while NBAD was underepresented in retail banking.
Arqaam said NBAD was undervalued versus FGB, but JPMorgan said current valuations suggested FGB shares offered a better risk-reward balance.
Meanwhile, an investment group led by prominent Dubai businessman Mohamed Alabbar agreed to buy a majority stake in Kuwait Food Co (Americana)
FOOD.KW
from the Kharafi family at 2.650 dinars each.
ID:nL8N19A0MK
That is well above Americana's last market price of 2.1 dinars; after the Dubai group completes the purchase of the stake, it will launch a mandatory takeover offer to remaining Americana shareholders at 2.650 dinars under Kuwaiti securities rules.
Americana shares have been suspended since Thursday. But stocks in other companies in which the Kharafis own major stakes - National Investment Co
NINV.KW
and Zain
ZAIN.KW
- rose on Thursday after Reuters reported that talks on the deal had revived, and these stocks could continue climbing on Sunday.
In Egypt, the central bank raised its key interest rates by 100 basis points after the close on Thursday to their highest levels in years, in order to rein in surging inflation and ease downward pressure on the Egyptian pound.
ID:nL8N1984AD
Analysts had been roughly evenly split on whether the central bank would tighten policy and few analysts who expected a tightening had predicted such a large hike, so the decision may hurt the stock market, especially since many economists think more tightening and currency depreciation are likely in the second half of this year.
(Reporting by Andrew Torchia) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
MSCI's all-country world stock index
National Bank of Abu Dhabi
JPMorgan Cazenove said in a report that it was too early to take positions in either stock since "visibility remains low as yet on factors like strategic rationale for undertaking the transaction from both sides, the form and timeline that this transaction could take and the size of synergies".
But local investors may nevertheless welcome the idea of an Abu Dhabi banking champion.
"We see strong merits of this potential transaction for both parties," said Arqaam Capital, adding that FGB would benefit from a stronger wholesale banking proposition while NBAD was underepresented in retail banking.
Arqaam said NBAD was undervalued versus FGB, but JPMorgan said current valuations suggested FGB shares offered a better risk-reward balance.
Meanwhile, an investment group led by prominent Dubai businessman Mohamed Alabbar agreed to buy a majority stake in Kuwait Food Co (Americana)
That is well above Americana's last market price of 2.1 dinars; after the Dubai group completes the purchase of the stake, it will launch a mandatory takeover offer to remaining Americana shareholders at 2.650 dinars under Kuwaiti securities rules.
Americana shares have been suspended since Thursday. But stocks in other companies in which the Kharafis own major stakes - National Investment Co
In Egypt, the central bank raised its key interest rates by 100 basis points after the close on Thursday to their highest levels in years, in order to rein in surging inflation and ease downward pressure on the Egyptian pound.
Analysts had been roughly evenly split on whether the central bank would tighten policy and few analysts who expected a tightening had predicted such a large hike, so the decision may hurt the stock market, especially since many economists think more tightening and currency depreciation are likely in the second half of this year.
(Reporting by Andrew Torchia) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
