Investor confidence on the UAE improved substantially particularly on real estate and construction sectors, thanks largely to Dubai World restructuring and new bond issuances.
According to Shuaa Capital’s monthly GCC Investor Sentiment Report, the biggest gainer in third quarter was the UAE, which saw the largest rise among investors’ confidence towards economic conditions. The Emirates’ on balance figure increased by 30.7 per cent, rising to -8.8 per cent. However, according to investors, the strongest economies in the region are Saudi Arabia (38.6 per cent) and Qatar (36.8 per cent), both making gains of over 10 per cent quarter on quarter.
The Shuaa Capital GCC Investor Sentiment Index rose by nine points in September 2010, reaching 119, its highest level since March 2010. The Shuaa Capital Investor Confidence Indices for each individual GCC state shows that there has been an increase in every country except Bahrain.
In terms of confidence, Kuwait rose the most, up 15 points to 114, with the UAE a close second, up 13 points to 117. Saudi Arabia once again had the highest level of investor confidence in the GCC with an Index of 133 points. Qatar is just behind with 130 points after a six-point rise on June’s Index, whilst Oman is back in positive territory with its Index at 120 points this quarter. Meanwhile, Bahrain’s Index has slipped by five points but remains in positive territory at 106.
Sameer Al Ansari, Chief Executive Officer of Shuaa Capital, said: “The Dubai World restructuring agreement marked possibly the most significant moment for regional economies since November last year. The broader GCC markets and economies have been held back over the course of the past year, as investors have stood by for a clearer outcome surrounding the restructuring progress. As this latest Report shows, investor confidence is slowly returning and we expect it to continue over the course of the next few months.”
Oliver Schutzmann, author of the Investor Sentiment Report, said: “Driving investor confidence in the region are the recent successful bond issuances out of the UAE and Qatar and the Oil price which has gained almost $16 per barrel since 2009, equivalent to a 26 per cent year-on-year increase.”
The respondents’ six-month economic outlook for the GCC economy as a whole rose 5.3 per cent, reaching 31.6 per cent. The UAE again improved markedly and was the GCC’s largest individual gainer, rising 18.4 per cent to 31.6 per cent. Similarly, Kuwait’s economy has a much more encouraging outlook, with its on balance figure rising 11.4 per cent to 24.6 per cent.
Overall, stock exchanges across the GCC were viewed as being undervalued, with the Abu Dhabi Stock Exchange seen as the most undervalued, with 40.4 per cent on balance. The Dubai Financial Market ranked second, with 36.8 per cent, whilst NASDAQ Dubai stood at 21.1 per cent.
In response to the question on ‘forecasting six months stock prices on the GCC exchanges’, investors overwhelmingly expected companies’ share prices to gain further. Specifically, the Abu Dhabi Stock Exchange and Saudi Stock Exchange (Tadawul) were mentioned as the two most likely to rise the furthest, up 11.4 per cent and 20.2 per cent respectively, reaching 35.1 per cent and 43.9 per cent.
For the first time since the report was first published in March 2009, all company sectors are expected to see increases in profitability over the next six months. The main highlight is the Real Estate, Construction & Materials sector which were up 12.3 per cent over the quarter and importantly the figure now stands at 1.8 per cent, the first time it has recorded a positive on balance figure. In the other sectors, transportation and logistics (47.4 per cent), consumer and retail (45.6 per cent) and pharmaceuticals (42.1 per cent) are viewed as being the most profitable, with Telecoms Media and Technology also recording a strong on balance figure of 35.1 per cent.