The overall GCC markets as measured by the S&P GCC composite index gained 9.6% in the first half of 2013, according to Kuwait Financial Centre (Markaz) report.
All the markets registered handsome double digit gains during the first half of the year; this was in part due to sustained higher prices realization for crude oil in global markets and expansionary fiscal policies. Dubai is the largest gainer, increasing 40.7%. Saudi, Qatar, Oman and Bahrain markets ended the first half with 10% to 12% increase.
“At the beginning of the year we were Neutral on Saudi Arabia. We expected oil prices to soften and production to moderate. Though we expected bank lending to improve no surprises were expected on earnings front. Market liquidity which surged by 77% in 2012 was viewed favorably,” Markaz in latest report on 2013 growth said.
“We were Neutral on Kuwait at the start of 2013, due to expectations of muted economic growth on back of continuing political squabbles which stalled economic reforms and held back government investments. Increased market liquidity in 2012 coupled with 35% earnings growth expectation were the positives.
“Our stance was Positive on United Arab Emirates. Tourism, Airlines and rebound in Real Estate sector was expected to aid economic growth. We expected corporate earnings to grow by 40% for the year, with the market trading at a P/E value of below 10 and P/B value of below 1, valuations looked compelling at the onset of 2013.”
“We were Neutral on Qatar on most counts. With growth moderating due to self-imposed moratorium on further development of its North gas fields, LNG exports remained stagnant. Government spending on infrastructure projects was forecasted to be robust. Market liquidity slumped by 31% in 2012. Amid widespread social unrest prevailing in MENA region, Qatar -with highest per capita income, was viewed favorably as a safe haven.”
“We maintained a Positive view on Oman at the start of the year. Though we expected the economy and corporate earnings to be moderate, we believed downside risk was capped. Relatively higher dividend yields (at 4%) supported by moderate valuations were in favor. Market liquidity which had tumbled for three consecutive years post global financial crisis stabilized and grew by 4% in 2012,” Markaz in a report said.
“Our view on Bahrain was Neutral (wavering slightly on the Negative end) due to weak corporate earnings outlook and prevailing negative investor sentiment. Mounting fiscal pressures, persistent geopolitical tensions, fall out of Bahrain as financial hub and subdued economic growth were cause of concerns. Bahrain also happens to be the only country among GCC nations to have a fiscal deficit.”