Despite the fact that across the Middle East most bourses began the New Year on a bearish note, many industry observers continue to cautiously predict that 2007 will be a year of growth, especially for GCC states UAE, Saudi Arabia and Kuwait.
According to forecasts by leading investment consultancy firm, Kuwait-based Global Investment House, GCC stock markets should grow by more than 25 percent in the coming year if earnings growth meets predictions, reported Khaleej Times.
"At current price levels, many stocks represent a good buying opportunity and provide a case of careful stock selection and accumulation," the report stated.
Slow start in New Year
Such markets nonetheless kicked off the New Year by dropping significantly, following an even gloomier 2006 in which an estimated $400 billion was lost. Across the GCC, where markets plunged by 49.3 percent last year, according to Arab News, the first weeks of 2007 brought further declines.
Saudi Basic Industries Corp.'s (SABIC's) shares fell over 3 percent last week to SR102, while shares of all listed banks were in the negative territory. The Tadawul All-Share Index (TASI) fell 373.67 points or 4.5 percent to close at 7,559.62 points Overall, the Saudi stock market turnover was over SR55.6 billion over the same period, with Anaam International Holding Group Co. being most active by value with SR3.4 billion, followed by Saudi Fisheries at SR3.37 billion and Al-Babtain Power and Telecommunication Co. at SR2.59 billion.
UAE stock exchanges of Dubai and Abu Dhabi moved sideways over the course of the week, with all-share price index declining 86 points, to close at 4,036 points from the previous close of 4,122 points last week.
Jordanian shares on the other hand ended the week on a slightly positive note after a sluggish beginning. The all-share price index of the Amman Stock Exchange was week, closing at 5,528 points, or 0.18 percent higher than the previous close. The small rise was attributed to news that the foreign currency deposit ratings of several Jordanian banks had been upgraded by Moody's Investors Service.
In Kuwait as well, the KSE all-share price index gained 0.4 percent to close at 10,104 points, up from 10,067.
"Cautious optimism" guiding investors
"There is cautious optimism in regional markets," said Wajdi Makhamreh, deputy CEO of the Amman-based Osoul Brokerage Co. Makhamreh explained that investors were keeping a lookout for 2006 financial results of listed firms, and predicted that until such information was published, investors would "focus on the speculative type of shares for the time being."
Commenting on regional political and security developments, Makhamreh said that their influence was dragging markets down. "In addition to expected dividend distributions, we believe political turmoil in the region and the retreating oil prices have something to do with the negative mood still dominating the markets," he added.
He also explained that the huge petrodollar surpluses accruing to Gulf countries were "instrumental in shoring up regional stocks" between 2002 and 2005.
Markets remain attractive
In general, Global reported, GCC markets looked very attractive compared with other emerging markets. Global pointed out that current valuations appear cheaper than many other emerging markets since they are closer to fundamental levels.
"The recent fall in the market has given opportunity to the institutional as well as retail investors to do "bottom-fishing" in the markets and we believe that markets will turn corner in 2007."
The Saudi stock market fell by 52.53 percent in 2006 after rising more than 103 percent the previous year.
The report added that in Kuwait and Saudi Arabia, which are trading at a P/E ratio of 11.5 and 15.9 respectively, multiples have the potential to expand further, while Oman, Qatar and Bahrain are also expected to register growth rates of 17 percent to 23 percent.
"The volatility in the markets is the part and parcel of any emerging capital market growth story but it is the ability to absorb these shocks which will determine the strength of the respective markets. The financial sector is awash with funds and corporates are taking advantage of easy availability of capital to fund expansion, both regionally as well as internationally."
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