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 Confidence Index fell 8.9 points in February as uncertainty around the Dubai World debt restructuring plans weighs on investor sentiment. After December’s significant second half gains which followed the announcement to repay the Nakheel ’09 Sukuk in full, the GCC Index has now recorded two months of consecutive declines, with the Index reading 105.6 points. The UAE (-11.7 points), Saudi (-8.7 points) and <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Qatar (-5.8 points) Indices lead the decline. The UAE Index now stands at 84.4 points, just 1.9 points off of its all time low following the Dubai World “standstill’ announcement in late November last year.
Specifically, this month’s sentiment survey asked members of the professional investment community if they require more transparency and disclosure on the Dubai World debt situation before they could make investment decisions in regional stock markets. Unsurprisingly, there was a resounding “yes” for all UAE stock markets. The balance of respondents - the difference between the percentage share of survey respondents saying “yes” or “no” - was 70% for Dubai Financial Market, 62.5% for Abu Dhabi Stock Exchange and NASDAQ Dubai. Interestingly, there was also a “yes” response for all other regional markets, indicating an inextricable link between GCC markets. The balance of “yes” responses was 12.5% for the Saudi, Qatar and Bahrain stock exchanges, 15% for Oman and 27.5% for Kuwait.
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Oliver Schutzmann, Chief Communications Officer of SHUAA Capital and Author of the Investor Sentiment Report, commented on the results: “The GCC is operating under a cloud of uncertainty as the professional investment community awaits the next move regarding the Dubai World restructuring efforts. Trading volumes are low, five year credit default swaps for Dubai – the cost of insuring debt against default – rose as high as 651 basis points in February1, and both local and international investors remain on the sidelines.
“As such, it comes as no surprise that investors are erring on the side of caution and are not over confident towards the UAE and wider GCC,” added Oliver Schutzmann. “However, it is important to note that the six month investor outlook for the GCC’s economic performance as a whole remains in positive territory, with 30% of investors expecting improving economic conditions, 47.5% seeing no change and 10% anticipating a decline. This indicates that despite short term uncertainty, investors expect economic conditions in the GCC to improve within the next six months.”
This view is also reflected in the six months GCC sector profitability outlook. Apart from Real Estate, Construction & Materials as well as Banks & other Financial Institutions, all sectors are expected to record strong profitability growth over the next six months. Telecoms, Media & Technology are, once again, expected to be the most profitable, with 35.0% on balance. Pharmaceuticals & Transportation & Logistics both have on balance figures of 30.0% after slight gains, while the Utilities sector is not far behind at 25%. Meanwhile, a strong gain of 15.5% in the Heavy Industries sector took it to 22.5% on balance; this is on par with the Consumer & Retail industry.
Investors’ six month outlook for regional stocks is positive this month for all regional markets except the Dubai Financial Market and NASDAQ Dubai. The view towards the Saudi Stock Exchange is relatively unchanged and still expected to set the standard for the region with 45% of the balance of investors anticipating stock prices to rise. Also in healthy positive territory is the Qatar Stock Exchange, which had an on balance figure of 30% for February. The Oman Stock Exchange and Abu Dhabi Stock Exchange are also expected to see some gains over the next six months, with on balance figures of 12.5% and 10% respectively.