Persian Gulf Shares Gain as the Dollar Rises; Tamweel Declines

By Zainab Fattah

Aug. 17 (Bloomberg) -- Persian Gulf shares advanced on optimism inflation may slow after the dollar climbed to a six- month high against the euro. Dubai's index dropped.

Arab National Bank, Saudi Arabia's sixth-largest publicly traded lender by assets, rose for a second day. Bank Muscat SAOG, Oman's largest bank, climbed to its highest in three weeks. Aviation Lease & Finance Co. rose after leasing planes to a Saudi Arabian airline. In Dubai, Tamweel PJSC dropped a second day after Dubai police said a former chief executive officer of the company is under investigation for alleged financial wrongdoing.

``The dollar's rise will help stem off inflation, which is plaguing the whole region,'' Mohamed Dwaikat, a senior broker at Al-Fajer Securities, said in a telephone interview from Abu Dhabi. ``Lower inflation will help companies retain higher margins of profitability as the cost of imports falls and it may attract more investors to the stock markets.''

Saudi Arabia's Tadawul All Share Index gained 0.3 percent to 8,357.23, bringing the five-day surge to 6 percent. The Muscat Securities Market 30 Index rose 1.3 percent, the highest close since Aug. 5, while the Kuwait Stock Exchange Index increased 0.2 percent.

Five of the six Gulf countries peg their currencies to the U.S. dollar. Inflation is at record levels in the region as the weaker dollar and high commodity prices make imports more expensive and as oil-fueled economic growth creates shortages of real estate and labor. Oman's inflation rate increased for the 22nd month to a record 14 percent in June on higher food costs. Kuwait is the only Gulf Arab state that ended the dollar peg.

Dollar's Rise

Last week, the U.S. currency climbed to strongest level in almost six months against the euro and advanced to a seven-month high versus the yen as the European and Japanese economies shrank and crude oil dropped.

Arab National Bank advanced 3.2 percent to 56.5 riyals. Bank Muscat climbed 2.8 percent to 1.74 rials, its highest since July 28.

Aviation Lease & Finance gained 2 percent to 260 fils. The Kuwaiti company said it leased eight Airbus aircraft to Saudi Arabian Airlines.

Damac Kuwaiti Holding Co. climbed 3.9 percent to 270 fils. The unit of Dubai's real-estate group Damac Holding reported second-quarter net income of 7.4 million dinars ($27.6 million), according to a statement on the Web site of the Kuwaiti bourse.

`Scaring' Investors

In the United Arab Emirates, the Dubai Financial Market General Index decreased 0.6 percent, while the Abu Dhabi Securities Exchange General Index fell less than 0.1 percent.

Mortgage provider Tamweel dropped for a second day, losing 4.1 percent to 5.86 dirhams. The company's former chief executive officer, Adel Al Shirawi, is under investigation by the Dubai Public Prosecution for alleged financial wrongdoing, a police official said on Aug. 14.

``The news of financial wrongdoing in major companies is scaring off investors,'' Hiba Azar, senior broker at Shaheen Financial Brokers in Dubai, said in a phone interview. ``The low volumes show investors are waiting for more news on the issue.''

Nakheel PJSC, the Dubai government-owned real-estate developer building three man-made islands in the shape of palm trees, said yesterday that one of its employees is being investigated by the police for bribery.

About 69 million shares traded in Abu Dhabi today, 69 percent less than the six-month daily average. In Dubai, volume fell by 51 percent compared with the six-month average.

The Bahrain All Share Index lost 0.4 percent, while Qatar's Doha Securities Market Index fell 0.8 percent.

Agility retreated 1.7 percent to 1,140 fils. The largest storage and logistics operator in the Middle East said second- quarter profit dropped 9 percent to 35.1 million dinars.

Zain declined 2.3 percent to 1,680 fils. The Kuwait-based phone company with operations in 22 Middle Eastern and African countries started selling shares to existing shareholders at 850 fils each, it said in a statement on the Web site to the Kuwaiti bourse.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.