GCC Investor Confidence remains positive at 113.1 despite dip resulting from wider global challenges
SHUAA Capital today issued its GCC Investor Sentiment Report, the only report of its kind for the Gulf markets. The SHUAA GCC Investor Confidence Index and its country sub-indices have a range between 0 and 200. A number greater than 100 represents positive sentiment while a number lower than 100 represents negative sentiment.
The GCC Investor Sentiment Index slipped by 7.7 points in April, although remained very much in positive territory at 113.1. This comes at a time when global markets and economies face numerous challenges including the Greek sovereign debt crisis, allegations of high level US investment bank fraud, an election in the UK and the ramifications of the Icelandic volcano eruption. The decline also came from the year’s highest Index level in March of 120.8 after Dubai World and Nakheel presented restructuring proposals to creditors which were broadly welcomed by the market.
The dip in the GCC Index was largely driven by Saudi Arabia and Oman, as their indices dropped by 7.9 and 4.6 points to 128.4 and 112.1 points respectively. Again, both indices did come from a relatively high level.
Bahrain was this month’s biggest gainer, as its Investor Confidence Index rose by 2.4 points to reach 106 points, the highest on record since November 2009. Elsewhere across the region, all other indices remained relatively flat with the UAE index dipping by just 1 point to 119.4 points and Kuwait’s by 0.6 points to reach 103.9. Qatar has seen a slight increase of 0.4 points, to lead the region and has the highest regional Index at 131.9 points.
Mr. Sameer Al Ansari, Chief Executive Officer of SHUAA Capital commented on the results:
“Given the integration of the GCC into the global economy in recent years, it comes as no surprise that the GCC is impacted by economic challenges stemming from Europe and North America, resulting in a decline in investor confidence.”
As part of the report, investors were asked what their views are on current valuations of regional and international stocks. Investors expressed that a range of regional and international markets are undervalued and that GCC markets were the most attractive. The Abu Dhabi Stock Exchange led the way with an on balance figure of 56.9%, up 22.4% on March. Another market in positive territory in April was the Dubai Financial Market which, for the second time running, was the month’s biggest gainer as it moved from 25% in March to 51.7% on balance in this latest report. The NASDAQ Dubai was also a positive mover in April as it gained 10% to 20.7% on balance.
Mr. Oliver Schutzmann, Author of the Investor Sentiment Report and Chief Communications Officer of SHUAA Capital, commented:
“It was particularly interesting to see that survey participants view UAE stocks as so increasingly undervalued, which shows that investors have faith in the long-term fundamentals of the Emirates. This comes as Western market stock valuations declined marginally according to our surveyed investors with the Dow Jones 30, Eurostoxx 50 and FT-SE remaining in neutral territory. Investors were also asked where they would be putting their money over the next six months and again the UAE came out on top. The UAE was the only destination with a positive figure in April, rising 15.3% to 22.4% on balance.”
Looking at sector profitability, all, apart from Real Estate Construction & Materials and Heavy Industries (which recorded 0% on balance this month), are expected to see increases in profitability over the next six months. The Consumer & Retail, Pharmaceuticals, Telecoms Media & Technology, Transportation & Logistics and Utilities sectors are expected to see significant gains in profitability with on balance figures of between 35% and 40% as they recorded slight increases on last months figures. The Bank & Financial Institutions sector also had a strong positive on balance figure for April at 22.4%.
Real Estate Construction & Materials is expected to continue to struggle in the current economy and record decreasing profits, as surveyed investors responded with -15.5% on balance.
April’s special question asked participants where they expect interest rates to go over the next six months. According to responses, all countries and regions surveyed are expected to see their interest rates rise over the course of the next six months. The majority of countries and regions fell into the 15%-25% bracket – the GCC (24.1%), Kuwait (15.5%), Oman (12.1%), Qatar (15.5%), Saudi Arabia (20.7%) and the UAE (24.1%). Bahrain, at 8.6% on balance, was the only country to have an on balance figure of less than 10%.
Meanwhile, the international regions of Global emerging Markets and BRIC countries had the strongest response to this question, both with on balance figures of 32.8%.
The balance of respondents indicates, for instance, the difference between the percentage share of investors that are positive and the share of investors that are negative on overall economic conditions.