The current boom of Gulf Arab bourses is expected to continue until at least mid-term, riding the wave of soaring oil prices. However, say analysts, thereafter investors could expect some corrections to the unprecedented growth.
Saeed Al Shaikh, chief economist of Saudi National Commercial Bank, told reporters at the <i>AFP</i>, “This boom is driven by oil for which demand is forecast to continue for several years. It will be sustainable at least in the next two years.”
“Fundamental causes of the boom are still in place. It will continue to remain favorable at least in the mid-term,” Shaikh added.
His comments were made at a recent symposium organized by the National Bank of Kuwait (NBK), the “Gulf equity markets: boom or bubble.”
Former US president George Bush Senior made the keynote address at the symposium, saying “The GCC markets are no longer a collection of local, illiquid markets. Rather, the region’s markets are evolving quickly into more mainstream markets with strong deregulation trends offering unprecedented opportunities for investors to tap into regional economic growth trends.”
Total market value of the seven GCC bourses are now well over 1.15 trillion dollars; at the end of 2000, they stood at only $119bn, indicating a ten-fold rise in just five years.
At the same time, the markets this year have so far doubled their gains with their price earning ratios the highest in the world and twice the ratio in other developing countries, according to CEO of Amwal Invest, Henry Azzam.
“We are living in a period of prosperity unparalleled in the history of this region ... More stability, less uncertainty and more regulations in the markets,” he said.
Omar Abdallah, head of MENA capital markets at NBK, warned, however, that corrections to the boom may lie ahead.
“Some markets have run ahead of themselves ... and they will undergo some corrections,” he said.
Abdallah predicted, though, that the current boom would continue longer due to huge investments in the oil sector.
