DUBAI (Reuters) - A year after a crash, Gulf stock markets are still tumbling, but will pick up amid slowly rising interest by foreign investors, local market players say.
Four of the seven stock markets in the Gulf Cooperation Council (GCC) -- Saudi Arabia, Kuwait, the United Arab Emirates’ exchanges in Dubai and Abu Dhabi, Qatar, Oman and Bahrain -- have fallen this year.
The Middle East’s biggest bourse in the Saudi capital Riyadh dived 6 percent on Monday, re-awakening painful memories of the Gulf crash last Spring.
“Are we over the worst? Anyone who claims they can answer that question is an idiot,” said Henry Azzam, chairman of the Dubai International Financial Exchange (DIFX).
“There’s still liquidity - it is being parked somewhere waiting for things to pick up. I‘m not sure we’re in a bear market,” Azzam told the Reuters Middle East Investment Summit.
Iyad Duwaji, Chief Executive of Dubai-based investment bank Shuaa Capital, said Gulf markets, which are dominated by few blue-chips amid low trading volumes by international standards, would stay volatile, but improve in 2007.
“Based on fundamentals, economic growth, expectations for company’s earnings, interest rates, that macroeconomic picture in general, we believe that shares throughout the GCC states will rise,” he said, echoing comments by other speakers at the summit.
Bader al-Sumait, executive vice president of Kuwait’s Global Investment House, agreed, saying many shares had returned to attractive valuations after some had traded at price-earnings-multiples of 40 prior to the crash.
“I expect GCC markets to rise more than 10 percent,” he said, adding that recent cross-border deals such as Qatar Telecommunications Co.’s buy of Kuwait’s National Mobile Telecommunications Co. for $3.7 billion are spurring interest and trading volumes in Gulf markets.
Sumait said he expected corporate profits by Gulf companies to grow by 23 percent on average this year, 7 percent higher than expected growth in other emerging markets.
STILL A MYSTERY?
With Gulf firms and governments awash with petrodollars unveiling multi-billion investments almost on a weekly basis, foreign investors, particularly from Gulf neighbors, are slowly entering the frame, market players said.
“We have seen that international investors are investing in this part of the world selectively,” said Global’s al-Sumait.
Until now, major foreign asset managers tended to avoid Gulf Arab markets, where shares often move long ahead of corporate results being published, in many cases only in Arabic, making the region one of the few the global financial industry has yet to penetrate.
Gulf governments have repeatedly vowed to introduce tougher transparency standards to lure foreign capital.
Sumait said some foreign investors exposed to emerging markets were now looking at Gulf stock markets to lower risks because local exchanges were not strongly correlated to major markets such as Europe or Wall Street.
And Duwaji said half of Shuaa’s brokerage revenues since the start of the year have come from foreign investors, mostly hedge funds.
“We have a new component in the market, which is the foreign investor for the first time,” he said.