EMERGING MARKETS-Dubai rebounds; emerging stocks at one-year highs

LONDON(Reuters) – Shares in Dubai-listed builder Arabtec surged 15 percent on Wednesday on hopes that a strategic investor will take a stake in the firm, lifting regional bourses, while broader emerging stocks hit one-year highs.

Strong gains on developed markets boosted MSCI’s emerging markets index by 0.8 percent, with Indian stocks posting a fresh record high and Russian markets jumping half a percent after the previous session’s losses.

The biggest gains were in the Gulf, however, with the Dubai market jumping more than 6 percent ahead of a scheduled briefing by Arabtec, whose shares fell more than 60 percent in June after its chief executive quit abruptly.

Its collapse hit the wider Dubai stock market, on which the construction firm is the most heavily traded share. Market players said on Wednesday there were rumours that a government-related entity will take over the 29 percent stake held by ex-CEO Hasan Ismail, although the company had not signalled this.

“Volatility always settles down when it is induced by short term inefficiencies. It will not be long before the Dubai market returns to more normal levels,” said Daniel Broby, chief executive of Gemfonds.

Dubai rose 3 percent on Tuesday due to a 10 percent surge in Arabtec, with blue chip real estate firms such as Emaar jumping up to 7 percent. Qatar stocks rose 1.5 percent.

William Jackson, an economist at Capital Economics said the recent volatility was a reminder that Dubai had not completely resolved the problems that caused its 2009 debt crisis.

“While Dubai equities, especially the real estate sector, have been a darling of investors, a lot of underlying vulnerabilities persist in the corporate sector,” he said.

Egyptian stocks fell 1 percent after the president approved a 10 percent tax on capital gains and stock dividends. The losses are expected to be muted because of hefty falls when the move was first announced in May.

“The problem is not trading tomorrow or the day after … the problem is with new investments. Will the taxes attract investment or repel it?” said Ehab Rashad of Mubasher for Securities in Cairo.

Elsewhere, Indian stocks rose 1 percent on expectations of a business-friendly budget on July 10 bringing year-to-date gains to 22 percent. Infrastructure stocks such as Larsen & Toubro have jumped more than 60 percent this year.

The rupee firmed 0.7 percent against the dollar to a three-week high, thanks to robust foreign inflows and also helped by recent weakness in the dollar which is just off two-month lows against a basket of currencies.

That lifted most Asian currencies, with the Korean won hitting a new six-year high

The Hong Kong monetary authorities also stepped in for their first intervention in two years to defend the dollar’s peg to the greenback as new stock listings and M&A deals tested the strong end of the currency’s trading band.

In emerging Europe, Russian stocks rose half a percent , supported by upbeat global data but gains were capped by caution over Ukraine where the government has renewed its offensive against pro-Russian separatists.

The rouble firmed 0.3 percent, after central banker Ksenia Yudayeva said inflation could reach 6.5 percent by year-end, a hint that monetary policy would remain tight.

The South African rand fell 0.5 percent to the dollar , suffering from the impact of an engineering and metalworkers strike that started on Tuesday. But the NUMSA union representing them said negotiations would resume on Thursday.

In central Europe, the zloty firmed 0.3 percent to a one-week high to the euro ahead of a central bank meeting that is likely to keep rates unchanged at 2.5 percent despite earlier expectations of a rate cut.

The Hungarian forint rose 0.3 percent off three-month lows , shrugging off signs of fresh conflict between banks and the government. Budapest stocks hit six-week lows.