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Dubai rally seen waning; Egypt upbeat.

Summary: Dubai's benchmark is up 14 percent in September.

Dubai's index has risen in 10 of the past 11 sessions to reach a four-month high, but some analysts warn there is little substance behind the rally and gains are unlikely to be sustained.

"The positive backdrop on international markets has also helped sentiment in the UAE, but if the Dow starts to fall then UAE stocks should also weaken," says Shahid Hameed, Global Investment House head of asset management for the Gulf region.

Dubai's benchmark is up 14 percent in September, trimming its year-to-date losses to 6.2 percent, bolstered by Dubai World's $24.9 billion debt restructuring agreement with creditor banks and the FTSE group's classification of the United Arab Emirates as an emerging market.

Yet these factors will have little impact on Dubai's economy.

"Dubai's real estate sector will take a long time to solve its structural issues and rebalance the supply-demand equation," adds Hameed.

"The UAE, and Dubai in particular, was a real estate play, either directly or indirectly, and the economy has to find a new growth engine, which I don't see happening at present. Hence, I wouldn't think equities can make a sustained rally -- current gains are more of a dead cat bounce."

Over in Egypt, some traders are sounding bullish as the government seeks to calm investors nervous about Talaat Moustafa Group's (TMG) legal dispute over a land sale for its $3 billion Madinaty project.

Shares in TMG, Egypt's biggest listed property firm, tumbled last week after a court upheld a ruling that a housing ministry body broke the law by selling land for the company's landmark project without an auction.

The government now says it will protect exposed investors and a cabinet meeting on Wednesday will try and find a solution. Another developer, Palm Hills , is also facing a lawsuit challenging one of the firm's land deals.

"I think the sentiment is high, no matter what happens with Talaat Moustafa Group and what will happen in Palm Hills -- I think the good sentiment will push the index to higher levels, which can lead investors to forget the case of Talaat Moustafa," says Amr El Feky of Cairo Capital Securities, citing global market rebounds and higher trading volumes.

Mohamed Swefy of Osool Brokerage is more cautious: "The market is still weak," says Swefy. "It's still hovering around the 6,600 mark, indicating some profit-taking, but volumes need to increase significantly."

Egypt's main index ended Monday at 6,609 points.

(Reporting by Matt Smith in Dubai and Shaimaa Fayed in Cairo; Editing by Jason Benham)

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Date:Sep 21, 2010
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