UAE and Qatar lead GCC investor confidence in August

The UAE and Qatar led other Gulf markets in terms of investor confidence during August, while the overall GCC confidence index gained 3.3 points to close at 126.3 points – up from 123 in July.

This indicates increased confidence in the Gulf markets among global and regional investors, says a report on GCC investor sentiment by Shuaa Capital.

The UAE investor confidence index rose to 118.8 points in August from 113.9 in July, but was still below its peak of 123 in June. The Qatari confidence index rose to 140.4 from 137.5, while the Saudi index dipped slightly from 138.8 in July to 135.4 in August. Oman's index improved from 119.2 to 120.8.

"The significant improvement in the overall GCC investor confidence index was largely driven by a positive shift in the balance of investors' perceptions of current regional economic conditions," said Oliver Schutzmann, Chief Communications Officer at Shuaa Capital and the author of the report. "In August, this figure moved to 1.5 per cent from minus 15 per cent the previous month."

The Abu Dhabi Securities Exchange (ADX) was in first place for investor confidence last month while Kuwait suffered the largest fall.

"Contributing most to August's positive movement were the UAE and Qatar," said Schutzmann. "The UAE investor confidence index was the biggest gainer in the GCC, up 4.3 per cent to 118.8 points. This makes up for some of July's losses after the index dipped to 113.9 points. Despite the improvement, the index still lags behind June's peak of 123.8 points. Driving the UAE index in August was improving sentiment towards the current state of the UAE economy. Positive responses doubled to 16.9 per cent with a similar level of negative and neutral responses at 38.5 per cent and 33.8 per cent, respectively."

Sentiment towards the UAE economy improved in August with the number of positive respondents doubling to 16.9 per cent while the figures for negative and neutral respondents were 38.5 and 33.8 per cent, respectively. Qatar's economy was seen as the most robust as investors were much more positive, recording a balance of 35.4 per cent.

Investors' opinion of Saudi Arabia's current economic state improved but views were still quite polarised, though to a lesser extent than in July, with 20 per cent taking a negative view, 33.8 per cent remaining neutral and 46.2 per cent saying they felt positive. This resulted in a balance for Saudi Arabia of 26.2 per cent.


Gulf to remain attractive

Respondents are even more likely to invest in GCC markets over the next six months than before, with the balance increasing significantly by 20.4 per cent to 55.4 per cent.

Saudi Arabia and the UAE, both with a balance of 41.5 per cent, were considered the most attractive individual markets in August. For the UAE, this was a dramatic 33.2 per cent increase on the previous month, while the kingdom saw a smaller but still substantial increase of 11.5 per cent.

Investors increasingly turned their attention towards Qatar and this was reflected in the 28.5 per cent jump in its balance to 38.5 per cent.

Investors felt more inclined to invest in Oman in August with the balance of respondents moving up 8.1 per cent into positive territory (3.1 per cent).

Kuwait's negative balance of minus 20 per cent remained unchanged on the previous month. Bahrain was the least likely market for respondents to invest in with a balance of minus 24.6 per cent, a figure that worsened by 7.9 per cent.

Attitudes towards the global emerging markets remained largely unchanged last month with a balance of 35.4 per cent, a 2.1 per cent increase over July. Investors were still interested in Brazil, Russia, India and China – the Bric countries – but less so than in July as the balance fell 11.7 per cent to 20 per cent.

While Kuwait (minus 20 per cent) and Oman (minus five per cent) still had negative balances, both made gains of 8.1 per cent and 9.6 per cent, respectively, on June's report.

However, investors remained less confident about investing in Bahrain, with a balance of respondents' figure of minus 16.7 per cent.


GCC ahead of Bric

August saw a strong improvement across the GCC economies, with the balance of respondents' figures for investors' perceptions of current economic conditions turning positive to 1.5 per cent – an improvement of 16.5 points. The Bric countries improved even more to 24.6 per cent compared with 13.3 per cent in July and the balance of respondents for global emerging markets also rose to 16.9 per cent from minus five per cent.

"The six-month investor outlook for the GCC economy remains positive this month, with a balance of 56.9 per cent, which is a slight improvement on last month's 55.3 per cent," said Schutzmann. "The GCC is now ahead of both Bric and the global emerging markets, who both recorded a lower figure of 49.2 per cent."

Among the GCC markets, Kuwait and Bahrain were the major losers in August. The Kuwait investor confidence index eased from 98.3 points to 88.8 and the country remained the weakest market in the region. The Bahrain confidence index dropped to 95 from 107.1.

"The results of the August report show that after a dip in the confidence index the previous month we are again moving in a more positive direction. Although only a 2.7 per cent gain, it is nonetheless a good sign and the small change is not surprising given that August is traditionally a quiet month."

Investors are very negative about Bahrain with only 4.6 per cent feeling positive about the economy, 35.4 per cent neutral and 47.7 per cent negative, resulting in a balance of respondents of minus 43.1 per cent, the worst balance since the survey began in April. However, sentiment was most negative towards Kuwait with only 1.5 per cent responding positively, 60 per cent negative and 32.2 per cent neutral. The balance of respondents moved further into the negative at 58.5 per cent. Oman had the same proportion of positive and negative respondents –15.4 per cent – as less were negative and more positive on the economy. This represented a consistent improvement since April.


Markets undervalued

"Investors still think stock markets across most of the GCC remain undervalued with ADX being the most undervalued with a balance of respondents of 55.4 per cent. Saudi Arabia follows closely behind the ADX at 46.2 per cent and is considered even more undervalued than last month, as is the Doha stock market with a balance of 44.6 per cent. Nasdaq Dubai is still seen as undervalued, but to a lesser degree with a balance of 16.9 per cent, a 9.8 per cent drop. The Dubai Financial Market [DFM] and the Oman stock exchange are on a par at 33.8 per cent, which is a strong improvement for both on last month," said Schutzmann.

He said Saudi Arabia was in the first place in terms of investors' six-month outlook with a balance of respondents of 55.4 per cent.

"This is closely followed by Qatar at 49.2 per cent, which has dropped nine per cent from last month and then the UAE, which has improved to 43.1 per cent, an increase of 6.8 per cent. Oman's balance of respondents is still positive, but has slipped to 32.2 per cent from 40 per cent.

"Investors are increasingly bearish on Kuwait and the balance of respondents has changed significantly for the worse at 4.6 per cent from 23.3 per cent. The same is the case for Bahrain, which stands at 9.2 per cent, its worst month so far," he said.

Investor sentiment towards Kuwait improved considerably with an increase in the balance of 17.7 per cent to 7.7 per cent. Bahrain saw a small rise to 6.2 per cent.

All markets except Kuwait and Bahrain were seen in a much more positive light than Western markets last month. Both the Eurostoxx 50 and Dow Jones 30 improved to 10.8 per cent and the FTSE 100 increased marginally to 12.3 per cent.


Abu Dhabi surges on

Investors continue to take a bullish view on the six-month outlook for regional stock markets. Abu Dhabi has now overtaken the Saudi and Qatari markets and is in first place with 55.4 per cent on balance expecting it to rise, an 8.7 per cent increase on July and the highest balance seen for any exchange in the survey so far. Saudi Arabia is still viewed very positively with a balance of 46.2 per cent, although this represents quite a decrease of 10.5 per cent. Qatar follows closely behind with a balance of 44.6 per cent, a decrease of 7.1 per cent.

Other regional markets continued to be viewed positively with the Oman stock exchange increasing by just over two per cent and DFM falling three per cent, resulting in an equal balance of 33.8 per cent for both.

Nasdaq Dubai fell more significantly from 33.3 per cent to 16.9 per cent.

Although the outlook for the Bahrain stock exchange remained positive on balance at 6.2 per cent, this was a 15.5 per cent fall against the previous month and the lowest balance out of all the exchanges. The Kuwait stock exchange saw the biggest decrease in investor confidence with a 23 per cent drop on July's balance to 7.7 per cent.

With the exception of Kuwait and Bahrain, investors continue to expect greater gains in GCC stock markets than Western bourses. Respondents are still positive overall on the Western markets, though less so compared with the previous month. The Dow Jones 30 index eased 33.3 per cent followed by Eurostoxx-50 with 10.8 per cent and the FTSE 100 with 12.3 per cent as all three indices recorded drops on the previous month of 22.5 per cent, 11.5 per cent and 11 per cent, respectively.


Inflation trends

When investors were asked what inflation trends they expected to see in different territories, the largest increase was expected in Bric and global emerging markets, both with a balance of 32.3 per cent, followed by the GCC countries with a balance of 26.2 per cent.

In terms of individual countries and emirates, inflation was expected to rise the most in Qatar (23.1 per cent), followed by Abu Dhabi at 18.5 per cent. Interestingly, Dubai was the only area where investors expected inflation to fall with a balance of minus 4.6 per cent. The balance for the UAE was 9.2 per cent. Oman and Saudi Arabia both recorded a balance of 16.9 per cent and inflation is forecast to rise but to a lesser extent in Bahrain and Kuwait with a balance of 12.3 and 4.6 per cent, respectively.


Oil and euro gain

The euro, gold and oil prices are all expected to make gains over the next six months. The balance for the euro remained unchanged at 20 per cent overall last month and oil was expected to rise, though the balance declined slightly by 2.5 per cent to 29.2 per cent.

The dollar was the biggest mover once again in August with the balance falling 20.2 per cent to minus 36.9 per cent, confirming that a large number of investors expect it to fall by the end of the year. Overall, investors believe the sterling will also fall and the balance remained relatively unchanged at minus 6.2 from minus 6.7 last month.


Profitability outlook up

The pharmaceuticals sector continued to lead the way in August and was seen as the most likely segment to see healthy profits over the next six months, gaining on balance a further 5.2 per cent to 36.9 per cent. The biggest gainer, however, was telecom, media and technology with the balance rising 37.9 per cent to 44.6 per cent.

There was a significant increase in investor confidence towards consumer and retail, which moved from a zero per cent balance to 26.2 per cent. The balances for transportation and logistics and utilities both reached 30.8 per cent, the former gaining 14.1 per cent and the latter 20.8 per cent. The balance for heavy industries doubled from five per cent to 10 per cent.

The outlook for the real estate, construction and materials sector remained negative on balance (minus 1.5 per cent) but this was a strong improvement of 18.5 per cent on July. Banks and financial institutions improved by 15.4 per cent to minus 4.6 per cent.

Opinion was most polarised on real estate, construction and materials with 32.3 per cent expecting a fall in profits, 33.8 per cent neutral and 30.8 per cent expecting an increase. Also worth noting is the particularly high number of respondents – 46.2 per cent – expecting no change in profitability across the utilities sector.

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