GCC Market Review

Published October 13th, 2009 - 02:38 GMT

Prepared by    : Global Investment House “Global”

Date                : October 2009

<?xml:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" /><?xml:namespace prefix = w ns = "urn:schemas-microsoft-com:office:word" />Global Investment House – Kuwait -           All GCC markets except Kuwait remained buoyant during September-09 on the back of by IMF’s prediction that the world is out of recession. According to the IMF's semi-annual World Economic Outlook, the world economy has pulled out of its worst recession since World War II and will stage a sluggish recovery in the coming year. Overall, the world economy will shrink 1.1 percent this year before growing 3.1 percent in 2010. That compares to the IMF's July forecast of a 1.4 percent contraction in 2009 and 2.5 percent growth the following year. For the Middle East, the IMF has revised its 2010 outlook to a growth of 4.2 percent (up 0.5 percent over its July estimate) while that of 2009 remains unchanged at 2.0 percent.

 

Investors reversed course for Saudi Arabia (the only decliner last month) with the market bouncing back to record monthly gains of 11.7 percent, the highest for the month among GCC countries. UAE came second with a growth of 10.3 percent while Qatar with the growth rate of 9.9 percent continued with its stellar performance in the previous month. For YTD, Saudi Arabia remains the best performer with the market gaining 31.6 percent while Bahrain remains the only market to remain in negative with a decline of 13 percent YTD.

 

Going forward, we believe that the markets are likely to stay range-bound till the third quarter results start coming in and then we expect to see stock specific trading activity based on the results that will come out.

 

Table 1 : Index Performances

Country

Measured by

 

Index Close

MTD Growth (%)

YTD Growth (%)

Bahrain

Global Bahraini Stocks Index

123.8

2.4

-13.0

Kuwait

Global General Index

219.5

-2.4

6.3

Oman

MSM Index

 

6,572.3

3.6

20.8

Qatar

Global General Qatari Index

 

590.5

9.9

14.4

Saudi Arabia

Tadawul All Share Index

 

6,322.0

11.7

31.6

UAE

NBAD Index

 

7,553.1

10.3

26.8

 Source: Respective Stock Exchanges and Global Research

 

MENA Global Competitiveness Ranking 2009-10

Firming on all the pillars of competitiveness is hard to achieve with indicators ranging from macroeconomic stability to financial market sophistication and labor market efficiency, the three top most hurt segments during the current economic slowdown. What started off as an economic and financial crisis in few of the developed economies spilled over into developing and emerging countries as well, hampering their growth, employment, per capita income, consumer and credit markets and mounting protectionist pressures worldwide.

 

Performance of the MENA countries remained mixed in the current edition of Global Competitiveness Ranking as out of 11 only 4 managed to improve their ranking while other slipped in the range of 1-16 notches and one managed to stay put.

 

Table 2: Global Competitiveness Ranking - MENA Countries  

 

 

 2009–10

 2008–09

 Gain / (Drop)

Qatar

22

26

4

UAE

23

31

8

Saudi Arabia

28

27

(1)

Bahrain

38

37

(1)

Kuwait

39

35

(4)

Oman

41

38

(3)

Jordan

50

48

(2)

Egypt

70

81

11

Morocco

73

73

0

Libya

88

91

3

Syria

94

78

(16)

 Source: WEF

 

 

 

 

The Middle East and North Africa region appears to be averagely affected by the global economic crisis than other emerging regions. In many energy exporting countries, abundant oil windfall profits have triggered a wave of reforms aimed at improving competitiveness. Most of the countries within the region are expected to post positive growth rates for 2009.

 

This year some of the successful reformers were Qatar at 22nd earlier at 26, United Arab Emirates at 23rd from 31st, Egypt at 70th from 81st and Libya at 88th from 91st. Rest of the countries tracked by WEF in the MENA region have fell in the range of 1-16 notches topped by Syria at 94th from 78th, Kuwait at 39th earlier at 35th followed by Oman and Jordan which fell 3 and 2 notches below to 41st and 50th.

 

Kuwait, world’s 4th largest oil reserves holder performed poorly this year as it ranking fell 4 notches to 39th. As per the data gathered by WEF, country’s five most problematic factors are inefficient government bureaucracy, restrictive labor regulations, access to financing, policy instability and uneducated workforce. The only indicator on which the country was able to perform the best was macroeconomic stability at 3rd from 133 countries.

 

Qatar, World’s third largest gas reserve holder takes the lead in the region, gaining four positions compared to last year. The country continues to weather the economic crisis well thanks to its abundant resources in natural gas with depletion period over 100 years. Country is well positioned as it is not inherent to short term price fluctuations because of long term gas sale contracts. Because of the continuous flow of revenue and surplus the country is moving in the right direction in many areas of competitiveness. The upgrading of the institutional framework continues (9th), and goods and labor markets are more efficient than in previous years, ranked 21st and 14th, respectively. In addition, the country has made great strides in harnessing the latest technologies, such as mobile telephony (2nd) and broadband (37th), and in opening up to foreign investment.

 

United Arab Emirates, World’s 6th largest oil reserve holder managed to improve its ranking by 8 notches to 23rd from 31st earlier. Major reason for better performance this time around was because of the consistent upgrading of institutions and infrastructure and rising technological readiness and innovative capacity over the past few years will help the UAE maintain its competitive edge in the longer term. However the emirate still face problems relating to sustainability of public finances, access to financing, uneducated workforce, restrictive labor regulations and most importantly inflation

Chart 1: Vicious Problems Engulfing the Region

 

 

 

 

 

 

 

 

 


Source:WEF

 

Saudi Arabia, World’s largest oil reserve holder and 5th largest gas reserve holder ranking dropped a notch below to 28th from 27th earlier due to fairly rigid labor market (71st) and the trustworthiness and confidence in the financial sector, which remain low, although they have held up well in the current financial crisis, improving from 98th to 81st. Country has performed well in the segments of macroeconomic stability at 9th and up-gradation of  its public institutions, ranked 28th this year.

 

Egypt moved 11 places to 70th as compared to 81st earlier because of its sheer size of its market (26th), which allows businesses to exploit economies of scale, the fairly solid private institutions (53rd), and the satisfactory quality of the transport and energy networks (55th). The challenges, on the other hand, are numerous. Egypt continues to struggle with serious challenges related to macroeconomic stability at 120th while its banking system continues to lack trustworthiness and solidity, as reflected in the 107th position in the rankings.

 

Bahrain and Oman the smallest emirates among the GCC with few estimated oil and gas reserve ranking went down to 38th and 41st respectively due to restrictive labor regulations, inefficient government bureaucracy and lesser access to government financing.

 

MENA region and particularly the GCC are macro-economically quite strong countries with continuous flow of petro dollars but they face five distinguishing problems which are: inadequately educated workforce, inflation, access to financing, inefficient government bureaucracy and restrictive labor regulations. The countries need to take counter measures to tackle with them if they wish to inch higher in the rankings.

 

Market activity...

GCC bourses saw 21.4bn shares being traded in the month of September-09 as compared to 22.2bn shares recorded in the previous month. The value of shares traded on the bourses declined to US$29.7bn in September-09 as compared to US$38.4bn reported in the previous month mainly on account of fewer trading days due to Eid holidays.

 

Table 5: Exchange Activity

Country

Total Volume Traded

Total Value Traded (US$)

Market Cap (US$)

No. of Transactions

Bahrain

108,478,074

60,805,228

16,977,932,424

1,427

Kuwait

5,658,202,500

4,946,620,761

124,405,789,049

97,944

Oman

697,682,068

631,110,085

18,093,238,545

107,877

Qatar

162,543,833

1,488,780,292

92,306,539,450

91,403

Saudi Arabia

2,230,178,426

15,916,736,913

328,127,145,438

1,751,152

UAE

12,536,699,033

6,618,590,125

157,133,756,460

230,855

Source: Respective Stock Exchanges and Global Research

 

The breadth of GCC stock markets was largely positive in September-09 as 370 stocks registered monthly gains as compared to 146 decliners whereas 194 stocks remained unchanged.


© 2000 - 2019 Al Bawaba (www.albawaba.com)

You may also like