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MIDEAST STOCKS-Market reforms help Dubai hit 5-mth high

By Matt Smith

DUBAI, Oct 4 (Reuters) - Dubai's index hit a fresh five-month high on Thursday after the market regulator announced reforms aimed at boosting liquidity.

Other Gulf markets were mixed, with some investors taking positions ahead of third-quarter earnings while others preferred to cut risk on the final day's trading before the weekend.

Late Wednesday, the United Arab Emirates' regulator said it had approved rules to allow lending and borrowing of securities, short selling and the introduction of market makers.

Bourse turnover slumped to seven-year lows in 2011 and many UAE brokerages have closed or cut staff, with trading levels now a fraction of the previous decade's highs.

"These reforms have been long-awaited and should increase liquidity in the medium term," said Kanaga Sunder, Gulf Baader Capital Markets head of research in Muscat.

Dubai's index rose 0.3 percent to 1,627 points, its highest finish since April 30 and up 20.2 percent this year.

"In the long-term, a break above 1,750 points will see the market completely out of the sideways range it has been stuck in for a couple of years - I would be looking for a bull run to start from there," said Musa Haddad, head of investment advisory services at National Bank of Abu Dhabi.

Emaar Properties was the main market support, rising 0.8 percent to a 22-month high.

"With Emaar doing well in terms of earnings, the market is picking up," said Shahid Hameed, Global Investment House's head of asset management for the Gulf region.

Emaar's second-quarter net profit more than doubled year-on-year and analysts are expecting the developer to post double-digit gains in the third-quarter on the same period last year.

In Egypt, Ezz Steel fell 3.8 percent after its former chairman, Ahmed Ezz, who was also a top official in ousted President Hosni Mubarak's ruling party, was jailed and fined for graft, the second sentence he has faced.

The court ordered that he pay a fine of 19.3 billion Egyptian pounds ($3.2 billion) in the latest case.

"The fine is so massive that retail investors began selling the stock immediately," said a trader at a Cairo brokerage, adding that, to those investors, the large fine could make it more likely that Ezz would have to sell his stake in the company.

Oman's index climbed 0.5 percent to its highest finish since July 1. The measure is down 0.9 percent in 2012 and fell 15.7 percent last year.

"Oman is a seasonal market - buying has picked up since the start of the fourth quarter and is driven by valuations, which are pretty attractive in frontline stocks," said Gulf Baader's Sunder.

"Earnings have also showed improvement on a sequential basis and Oman has underperformed the rest of the Gulf for quite some time, so there's an incremental flow into stocks from local and regional institutions."

Kuwait's measure rose 0.3 percent, taking its gains to 5.6 percent since August's eight-year low.

"Kuwait has picked up a little bit over the last few weeks - there's positive chatter that the government could be more active going forward in terms of spending, which has been the main trigger for the market," said Shahid Hameed, Global Investment House head of asset management for the Gulf region.

"Kuwait also lagged other Gulf markets, so there's a catch-up play too - bellwether stocks such as Zain and Kuwait Finance House (KFH) have done well."

Zain and KFH reversed early-session losses to end flat and have each made double-digit gains in the past month.

THURSDAY'S HIGHLIGHTS DUBAI * The index climbed 0.3 percent to 1,627 points. ABU DHABI * The index slipped 0.1 percent to 2,650 points. EGYPT * The measure rose 1.2 percent to 5,726 points. OMAN * The index climbed 0.5 percent to 5,646 points. KUWAIT * The measure rose 0.3 percent to 5,995 points. QATAR * The benchmark fell 0.3 percent to 8,478 points. BAHRAIN * The measure rose 0.08 percent to 1,078 points.

(Additional reporting by Marwa Awad and Tom Pfeiffer in Cairo; Editing by Mahmoud Habboush)

((davidj.french@thomsonreuters.com)(+971 4 362 5864)(Reuters Messaging: davidj.french.thomsonreuters.com@reuters.net))

Keywords: MIDEAST MARKETS/WRAP