MENA equities shaping for a gang-busters recovery?

Posted on February 28, 2012


The seven major GCC stock markets have so far gained 6.98% in 2012.

Egyptian Exchange

The Egyptian Exchange has been the best performer not just in the MENA region but globally in the year to date. (Image via Wikipedia)

If the geo-political situation in the region remains relatively stable this year, equity investors in the Middle East and North Africa can hope to recover some of the massive losses they sustained in the aftermath of the Arab Spring and the global economic crisis.

In stark contrast to 2011, when they cumulatively lost 12.41% of value, the seven major GCC stock markets have so far gained 6.98% in 2012. The Dubai Financial Market has been the star of the show, adding 23.30% in the first two months of the year. The Saudi Tadawul exchange has added 11.96%. Qatar Exchange has been the contrarian play — it gained 0.43% in 2011 and is down 0.32% in 2012 to date.

In the wider MENA region, however, the Egyptian Exchange has had a stellar 2012 to date, gaining a massive 41.81%, compared to a loss of 49.47% in 2011. Egypt’s colonial-era art nouveau bourse, the oldest in the Arab world, has been driven largely by a tentative improvement in the political outlook.

For the Gulf bourses, optimism on several fronts is driving sentiment. Saudi Arabia — the largest, most liquid and yet least accessible market in the Arab world — is considering opening its stock market to foreign investors in a move that could help erode the dominance of local retail investors and turn the market into a regional trading hub. The UAE and Qatar exchanges are waiting for a decision on being upgraded from ‘Frontier’ to ‘Emerging’ market status by index-provider MSCI, something that will attract more global institutional fund flows.

The economic prospects of the Gulf oil exporters continue to be positive, with crude prices remaining above USD 100 per barrel, which gives the six nations enough leeway to balance their budgets and drive fresh investment in non-oil sector growth. Overall, the equity markets in the region are shaping up for a gang-busters recovery, at least in the first half of the year.

— Yazad Darasha

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Posted in: Markets