MENA equity markets fell by 1.2% in December bringing their 2009 gains down to 17.3%. Regional markets continued to suffer following Dubai World’s announcement on November 25th 2009 that it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30th, 2010.
The Dubai government stated that it will not guarantee the debt of its government related entities. On December 14th, the government of Abu Dhabi injected USD 10.0 billion to the Dubai Financial Support Fund, which will be used to satisfy a series of obligations on Dubai World, most significantly the USD 4.1 billion Nakheel sukuk that matured on December 14th. The move was well received by credit markets and led to a dramatic reduction of implied credit risk premiums on Dubai sovereign and government related entities (GREs) debt. Capital markets also reacted positively to the new development, as on the day of the announcement, the DFM and ADX indices increased by 10.4% and 7.9% respectively.
Tunisia was the best performing regional market in 2009, gaining 48.4%, followed by Egypt which gained 35.1%. Bahrain ended the year as the worst performing market losing 19.2%, followed by Kuwait which fell by 10.0% in 2009. MENA markets have underperformed both emerging markets and the US market for 2009. MSCI Arabia gained 17.3% in 2009 versus 23.5% for the S&P 500 and 74.5% for MSCI EM.
In the UAE, ongoing uncertainty surrounding the outcome of Dubai World's moratorium request, weighed down the DFM index as it fell 7.0% during the month. The ADX index managed to gain 2.8%, bringing the year to date gains for the two indices to 10.2% and 14.8% respectively.
Saudi Arabia’s Tadawul Index (TASI) fully reversed the gains recorded in November, as the index was down 3.7% by the end of December. On a regional level the TASI underperformed all indices with the exception of the DFM. On a positive note, year to date gains were 27.5%, representing the third best performance regionally after Tunisia and Egypt.
Egypt’s EGX 30 was the best performing market in the region for the month, increasing by 5.8%. The EGX 30 outperformed regional peers, as it had previously taken a severe hit due to Dubai’s debt problems on the last trading day of November 2009, unlike most other regional indices that took the hit on the first trading session of December.
The Kuwait Stock Exchange (KSE) gained 1.0% during the month of December. Yet, on a year to date basis the Kuwait market has performed poorly, losing 10.0% since the beginning of the year; rendering Kuwait as the second worst performing market in the region, after Bahrain.
As a result of the Dubai World debt crisis, Qatar’s DSM 20 index lost 8.3% on December 1st, 2009, its first trading session following the Eid holidays. However, the index has been on the road to recovery ever since, recouping most of its losses to conclude 2009, with a month to date drop of 3.3%. Performances in the banking sector have been improving lately, following an announcement made by Qatar’s Finance Minister, stating that the government will buy 5% of some local banks (with the exception of Qatar National Bank) spending around USD 900 million in an effort to boost investor confidence.
The Omani market ended the last month of 2009 up 0.2%, resulting in a year to date gain of 17.1%. The banking sector was under the spotlight during the month as several banks disclosed their exposure to Dubai World's debt. The Central Bank announced that Omani banks' exposure to the Dubai-based troubled company is estimated at USD 77.0 million.