DOHA: GCC equity markets are likely to remain on an upward trajectory in second half (H2) of 2013, building momentum on the strong rally witnessed during H1 2013. Increased interest of foreign investors in Qatari and UAE markets, following the MSCI upgrade, is also expected to contribute to the up-move, according to a report released by Alpen Asset Advisors.
Continued momentum on reforms, healthy economic growth, investment in non-oil sectors, stabilisation of oil prices, recovery in real estate sector, better corporate earnings and compelling valuations are likely to be the key positive triggers for the GCC equity markets.
The GCC equity markets offer investors a unique combination of strong corporate earnings growth, high dividend yield with reasonable valuations. The markets are just starting to get on the radar of international investors and also being actively considered for intra GCC cross investments. Hence, we believe that the markets in the GCC are on the cusp of huge growth in terms of size and continuing strong market performance.
“International money will flow, driven by market friendly reforms by the regulators. Reforms could focus on easier listing norms for broader markets, higher foreign ownership limits and single registration for GCC wide investment ability for foreigners. Our report offers investors insights into the themes and sectors which will drive the GCC markets going forward”, said Sudarshan Malpani, Managing Director, Alpen Asset Advisors Limited.
Historically, GCC markets have been characterized by high volatility due to the absence of foreign investors and lack of market breadth. However, it is expected that an expansion in market breadth and depth due to increasing foreign participation.
Recent stabilisation in oil prices is likely to improve the fiscal position of GCC governments and encourage investments in non-oil sectors. Refining and infrastructure projects worth $700bn are likely to be undertaken in the region. Rising government spending would boost the region’s economic performance in 2013.
The real estate sector assists construction-related industries and is also an indicator of the overall business activity. The sector was a key contributor to the economic downturn of 2008. However, the real estate sector in GCC is on a gradual recovery path.
As the GCC economies are poised for growth, the focus remains on select sectors which have immense growth potential. These include retail, banking, real estate & construction, transport & logistics and telecommunication.
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