GCC markets to remain upward trend in 2013

The GCC equity markets are likely to remain on an upward trajectory in H2 2013, building momentum on the strong rally witnessed during H1 2013, according to the report GCC Market Outlook for 2013 published by Alpen Capital.

Increased interest of foreign investors in the UAE and Qatari markets following the MSCI upgrade is also expected to contribute to the up-move.

Amongst others, continued momentum on reforms, healthy economic growth, investment in non-oil sectors, stabilisation of oil prices, and recovery in real estate sector, better corporate earnings and compelling valuations are likely to be the key positive triggers for the GCC equity markets. According to Bloomberg consensus estimates, earnings of equities constituting the MSCI GCC index are expected grow a healthy 10.3% YoY in CY2013.

The broad macro environment for 2013 also encourages this growth as the end of fiscal cliff in the U.S. and quantitative easing in emerging markets as well Europe would provide much needed impetus. According to the IMF, real GDP growth in GCC is expected to slow down to 3.2% from 5.7% in 2012. This is primarily due to the scaling back of the growth rate in hydrocarbon production.

The economic growth, however, remains contingent on several factors such as stable oil prices and continuous improvement in socio-political situation in the region. The overall GCC market, however, remains exposed to spells of volatility that could arise from lack of institutional participation, high dependence on oil, and any impediment to global economic revival.

The GCC equity markets offer investors a unique combination of strong corporate earnings growth, high dividend yield with reasonable valuations. The markets are just starting to get on the radar of international investors and also being actively considered for intra GCC cross investments. Hence, we believe that the markets in the GCC are on the cusp of huge growth in terms of size and continuing strong market performance.

International money will flow, driven by market friendly reforms by the regulators. Reforms could focus on easier listing norms for broader markets, higher foreign ownership limits and single registration for GCC wide investment ability for foreigners. Our report offers investors insights into the themes and sectors which will drive the GCC markets going forward”, said Sudarshan Malpani, Managing Director, Alpen Asset Advisors Ltd.