Arab markets bit by Greek crisis in Q2

Arab stock markets plunged in the second quarter of 2010 because of Greece's debt crisis to reverse an upward trend they had recorded over the previous four quarters, an official study showed on Wednesday.

The decline hit most regional bourses in terms of market capitalisation, share index and turnover while most of they generally recorded an improvement in initial public offerings (IPOs), showed the study by the Arab Stocks Data Base at the Abu Dhabi-based Arab Monetary Fund (AMF).

The depression illustrated the growing inter-action between the Arab stock exchanges and global markets as they tracked most other emerging markets which were influenced by global market uncertainty following the Greek crisis.

"Most Arab markets recorded a marked decline during the second quarter of this year to reverse a gradual recovery and improvement they had witnessed since the second quarter of 2009," the AMF said in its quarterly bulletin.

"The decline was mainly a result of the state of instability that hit global markets due to fears from the Greek debt crisis, which has created a state of uncertainty among regional investors and their market outlook....the Arab markets have also been affected by the fall in the profits and dividends by some companies."

The report said Arab markets suffered from a decline despite projections about a better outlook for the economic performance of regional countries.

"This shows how close the Arab markets have become to global markets although this varies from one market to another, depending on the ability of each market to attract foreign capital...there is no doubt the Arab markets which have more foreign investment are naturally more influenced by global crises."

The report showed a complex index introduced by the AMF a few years ago to track regional bourses dipped by nearly 8.8 per cent in the second quarter of 2010 against an increase of 6.8 per cent in the first quarter.
It said the decline in the index tracked a similar trend in emerging and global markets, most of which recorded a drop in their index in the second quarter.

"The majority of Arab stock markets recorded a decline in the second quarter except those of Morocco, Palestine and Sudan," the report said.

A breakdown sowed Abu Dhabi suffered from the largest drop of around 13.8 per cent in the second quarter, followed by Oman's Muscat bourse, which shrank by nearly 11.5 per cent. Bahrain and Kuwait slumped by about 10.7 per cent while there was a decline of around 9.9 per cent in Egypt, and between 7.8 and 9.1 per cent in the markets of Saudi Arabia, Jordan and Lebanon.

The report showed the combined Arab market capitalisation plunged by around 10.1 per cent to $869.9 billion at the end of the second quarter of 2010 from about $967.8 billion at the end of the first quarter.
"The level is far below the capitalization before the global crisis, when it stood at as high as $1,390 billion at the end of June 2008," the AMF said.

As for turnover, the value of traded shares, the report showed there was a decline of around 18.2 per cent in the combined Arab market turnover in the second quarter, when it stood at around $120.8 billion.

But the report noticed an improvement in IPOs in the region, with the value of the total 16 IPOs issued by the listed firms standing at $1,204 billion in the first half of 2010. This compares with 17 issues worth $2,144 billion through 2009.

"There was a gradual improvement in the IPO activity in the Arab countries in the first half of this year, mainly in the second quarter," the AMF said.

"A noticeable development in this year's issues is that the average IPO subscription reached 9.7 times compared with only 4.9 times last year."

According to the report, IPOs in the Arab region climbed to an all-time high of 71 issues with a total value of $14.4 billion.

"As for foreign investments, a large number of Arab stock markets recorded a relative improvement in foreign capital inflow in the first few months of 2010...available data showed the share purchase deals by most foreigners largely surpassed their sale deals," it said.

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