You can still make money on the GCC stocks markets: analyst

The Gulf stocks markets are expected to continue their steady upward momentum, thanks to strong macro-economic growth and revival of the IPO market, said Arjuna Mahendran, Chief Investment Officer at Emirates NBD, in a note.

 “Given a favourable macro-economic backdrop, we do not expect significant setbacks to the equity market in the short-term. Occasional market liquidity squeezes would offer a good opportunity to enter or add on dips to quality growth stocks for the longer term. The summer – usually marked by lower volumes and higher volatility – could also provide potential entry points to investors looking to get equity exposure,” Mahendran said.

He said momentum in the UAE equity market is sustained by higher than average trading ‘volumes and is seen to continue, interrupted only by the usual Spring/Summer volatility’.

In the shorter term investment in dividend yielding stocks – April and May being the typical payout months – could yield some upside. In Saudi Arabia, Sabic has two cash pay-outs in April and July, Al Rajhi, ADCO, Al Khaleej, SPIMACO and Budget pay stock and cash dividend in the next 3 months. Riyadh bank has a 100 per cent stock dividend payout in May and a number of other stocks have pure cash dividends.

The IMF has upgraded UAE GDP growth for 2014 to 4.4 per cent, citing rising property prices and infrastructure development linked to Dubai’s World Expo exhibition in 2020. The strength of the real estate sector is attested to with strong corporate earnings announced by Dubai government-owned Nakheel.

As Qatar and the UAE are withdrawn from the MSCI Frontier Markets Index and included in the MSCI EM index in early June 2014, Kuwait’s weighting in the MSCI Frontier Markets index would likely increase to 28.5 per cent. Kuwaiti stocks could therefore offer upside based on higher inflows from frontier market funds.

In what is seen as a repeat of the equity market boom years 2004 and 2005, Mahendran said a number of large upcoming IPOs in the GCC markets are expected. Currently, Marka IPO in UAE is underway and has seen strong interest from investors, its lead manager said.

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