GCC stock valuations more attractive than frontier, emerging markets

The Gulf Cooperation Council (GCC) stock markets offer very attractive valuations and their valuations are lower than similar frontier and emerging markets, said a Global Investment House report issued on Thursday.

“GCC equities began 2014 on a positive note, largely led by an uptick in earnings across key cyclical sectors such as banking, services, insurance and industrial. Despite the recent surge, some markets continue to remain fairly attractive. In terms of one-year forward PE, the six bourses traded in the range of 9.4–13.5x. This is fairly below the region’s three- and five-year historic average of 13.5x and 13.4x, respectively. The valuation is also lower compared with similar frontier and key emerging markets,” Global research report said.

The combined market capitalization of GCC bourses increased 4.2 per cent month-on-month to $1,026.6 billion (Dh3,767.6 trillion) in February 2014. All indices witnessed a rise in market capitalization during the month. With $496.7bn, the TASI was the highest contributor, followed by Abu Dhabi and Dubai ($205.6bn or 20 per cent), and Qatar ($171.8bn or 16.7 per cent). Kuwait, Oman, and Bahrain together contributed $152.5bn.

Global said overall trading activity in GCC broadly declined on month-on-month (MoM) basis in February 2014, after a rise in January.

Volume traded plunged 17.6 per cent MoM, with all markets, except Qatar, Bahrain and Saudi registering a fall on MoM basis. The value traded advanced a mere  one per cent MoM, mainly due to declines in Saudi Arabia and Kuwait.

Oman saw the biggest gain in value traded (202.2 per cent MoM), followed by Bahrain (33.7 per cent MoM) and Qatar (20 per cent MoM). Meanwhile, with $36bn, Saudi Arabia remained the largest contributor to the total trading value. In terms of trading volume, the UAE led with 25.5bn shares, Global report said.

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