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29 March 2024

GCC sees surge in confidence of investors

Majority expects year-end rally on the UAE markets. (EB FILE)

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By Sreenivasa Rao Dasari

GCC investors, buoyed by the continuing economic strength of the Gulf countries during the global economic recession, are optimistic about seeing a year-end rally on the UAE markets, said a new report.

Fifty-one per cent of investors expect a rally on the Abu Dhabi Securities Exchange (ADX), 45.1 per cent forecast a rally on the Dubai Financial Market (DFM) while Nasdaq Dubai scored 33.3 per cent.

The findings are contained in Shuaa Capital's GCC Investor Confidence Index and Investor Sentiment Report.

"When asked which exchanges would experience a year-end rally, investors were very positive about the ADX," said Oliver Schutzmann, Shuaa's Chief Communications Officer and the author of the report. "Fifty-one per cent of investors surveyed are expecting a year-end rally in the last quarter of 2009, while 23.5 per cent are undecided and only 19.6 per cent do not expect a rally."

GCC investors are upbeat about the region's markets. The GCC Investor Confidence Index rose one point in September for the successive second month, moving to 127.3 points. The continued improvement as the end of the year approaches indicates an increase in confidence in the region among global and regional investors.

"It is very encouraging to see the GCC index on the rise once again," added Schutzmann. "Investor sentiment towards the region has been consistently improving over the past six months with only one month-on-month drop since April 2009."

Investors are expecting a year-end rally on other region bourses too. Most of the respondents were very positive about regional stock markets, particularly Saudi Arabia's Tadawul (31.4 per cent) and Qatar (28.5 per cent).

In contrast, the main Western markets did not fare so well, with all three included in the survey rated negatively. The Dow Jones 30 had a balance of -2 per cent, while the FTSE 100 and Euro Stoxx 50 both had a balance of -3.9 per cent.

Across the GCC, investors are keen to invest in the next six months, albeit to a slightly lesser extent than in August. The UAE seems to be the most attractive market, with an on balance figure of 31.4 per cent, a 10.1 per cent drop when compared with August.

Qatar and Saudi Arabia are not far behind, at 25.5 per cent and 21.6 per cent on balance respectively. However, investors are much less likely to put their money into Saudi Arabia and Qatar with both recording significant drops of 19.9 per cent and 13 per cent respectively.

Respondents are still more likely to invest in the GCC than the global emerging markets and Brazil, Russia, India and China (Bric) over the next six months. The balance of respondents for investing in GCC markets was 47.1 per cent this month, down 8.3 per cent on last month. Meanwhile, the balance for global emerging markets was 35.3 per cent, with the Bric countries scoring 11.8 per cent.

Oman, Bahrain and Kuwait are all still not seen as potential markets for investment, with Kuwait slipping another 3.5 per cent to -23.5 per cent on balance, Oman dropping seven per cent into the negative at -3.9 per cent and Bahrain gaining seven per cent but still scoring just -17.6 per cent on balance.

The global emerging markets remained steady at 35.3 per cent on balance, while the Bric countries' balance figure dropped 8.2 per cent to 11.8 per cent.

The ADX is once again the most undervalued regional exchange in the view of investors, with a balance of respondents of 35.3 per cent. It is a similar story across the rest of the GCC, where other stock markets remain undervalued, particularly the Tadawul and the Qatar exchange, which follow closely behind the ADX at 25.5 per cent and 21.6 per cent respectively. However, both the Kuwait Stock Exchange and Nasdaq Dubai are seen to be overvalued with respective balances of -5.9 per cent and -2 per cent.

Elsewhere in the region, the Oman and Bahrain exchanges remain fairly neutral in the eyes of investors, with balance of respondent figures of 7.8 per cent and two per cent respectively.

Investors continue to take a bullish view of the six-month outlook for regional stock markets. The Tadawul regains its position as the most promising regional exchange for the prospect of rising share prices with a balance figure of 41.2 per cent. Not far behind are the Doha and Abu Dhabi stock markets, which both have on balance figures this month of 33.3 per cent.

Other markets that continue to be viewed positively are the Oman Stock Exchange, Nasdaq Dubai and DFM. Investors are expecting stocks to rise with figures of 23.5 per cent, 21.6 per cent and 25.5 per cent respectively. The Oman Stock Exchange and DFM actually fell from last month's 33.8 per cent, but continue to be seen as markets with rising stocks, according to investors.

The outlook for the Bahrain and Kuwait Stock Exchanges continues to be positive on balance at 15.7 per cent and 11.8 per cent respectively, with both exchanges gaining on last month's figures of 6.2 per cent and 11.8 per cent.

Interestingly, investors continue to expect greater gains across all the GCC stock markets compared to Western markets. Respondents were neutral when it came to the Euro Stoxx 50, with a zero per cent figure while they were negative towards the Dow Jones 30 (-3.9 per cent) and the FTSE 100 (-2 per cent).

Relatively, the region's stock markets are seen as favourable in comparison with markets in the West. The Dow Jones 30, Eurostoxx 50 and FTSE 100 recorded on balance figures of -31.4 per cent, -29.4 per cent and -29.4 per cent respectively.

On the current state of the GCC economies, a component of the confidence index, Schutzmann said: "The improvement in the index was largely driven by a positive shift in the balance of investors' perceptions of current regional economic conditions.

"In September, this figure moved to 15.7 per cent from 1.5 per cent last month and -15 per cent in July. The UAE and Bahrain drove this improvement, with increases of 11.7 and 19.6 points respectively. The index has seen improvement, thanks to higher confidence in the UAE's current economic conditions."

Schutzmann said the six-month investor outlook for the GCC economy was relatively unchanged at 54.9 per cent in September compared with last month's 56.9 per cent.

"The GCC remains very competitive with the Bric countries and global emerging markets, which recorded figures of 54.9 per cent and 60.8 per cent respectively. The six-month economic outlook for the UAE remained unchanged this month."

Bahrain and Kuwait were the biggest gainers this month with the most significant improvement in investor confidence being towards Bahrain.

The Bahrain Investor Confidence Index increased by a considerable 12.8 points this month, pushing the figure back over the 100-point mark to 107.8 points.

Not far behind was Kuwait, which gained 9.7 points as its index touched 98.5 points. Despite these significant gains, Bahrain and Kuwait remain the two countries with the lowest level of investor confidence in the GCC.

Elsewhere in the GCC, Saudi Arabia and the UAE both recorded positive movements. The kingdom jumped 3.3 points to 138.7, making it the highest index in the region, while the UAE gained a marginal 0.6 points to 119.4.

Meanwhile Qatar and Oman saw their indices slide 4.6 and 5.6 points to 135.8 and 115.2 points respectively. In spite of decline, Qatar still recorded the second highest level of investor confidence in the region.

This month has seen a strong improvement across the GCC economies, with the balance of respondents figure for investors' perception of current economic conditions jumping to a far more positive position of 15.7 per cent, up from 1.5 per cent last month.

Bric saw a decline this month, falling to 21.6 per cent compared with 24.6 per cent last month and the balance of respondents for the global emerging markets also fell marginally to 15.7 per cent from 16.9 per cent.

"There's significant improvement in investors' view of the Bahrain and UAE markets," says the report.

The improvement in the GCC index was largely driven by a positive shift in the balance of investors' perceptions of current regional economic conditions. In September this figure moved to 15.7 per cent from 1.5 per cent last month and -15 per cent in July.

The main contributors to this month's sharp increase were Bahrain, which moved from -43.1 per cent to -23.5 per cent, and the UAE, which improved dramatically from -21.5 per cent to -9.8 per cent.

Qatar's economy is still perceived to be the most robust, as investors are positive about its current condition, recording a balance this month of 31.4 per cent, down from 35.4 per cent last month.

Investor opinion of Saudi Arabia's current economic state declined very slightly to 25.5 per cent from 26.2 per cent in August. Oman saw this month's biggest decline, slipping to -11.8 per cent from last month's neutral view. Meanwhile, Kuwait's September figure rose to -41.2 per cent from -58.5 per cent in August.

The six-month investor outlook for the GCC economy remains relatively unchanged on last month's 56.9 per cent at 54.9 per cent. The GCC remains very competitive with the Bric countries and Global Emerging markets, which recorded figures of 54.9 per cent and 60.8 per cent respectively.

Saudi Arabia remains in first place in terms of investors' six-month economic outlook with the balance of respondents at 62.7 per cent up from 55.4 per cent last month.

It is closely followed by Qatar at 56.9 per cent, which has risen 7.7 per cent from last month and then the UAE, which has remained at 43.1 per cent.

Oman's balance of respondents have seen a significant rise this month, to 41.2 per cent from last month's 32.3 per cent.

Investors are showing increasing support for Bahrain with a balance of respondents up from 9.2 per cent to 37.3 per cent.

Kuwait is up to 29.4 per cent from last month's figure of 4.6 per cent.

The pharmaceutical sector is again seen as the most likely segment to see strong profits over the next six months, gaining on balance a further 4.3 per cent to 41.2 per cent.

The biggest gainers, however, this month were banks and financial Institutions, which jumped up 10.5 per cent into positive territory to 5.9 per cent.

The other sector to see a gain was transport and logistics, which moved up 0.6 per cent to 31.4 per cent on balance.

 

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