GCC investor confidence index maintains positive trend

Investor confidence across GCC remained positive in July despite a decline, according to Shuaa Capital. GCC investor confidence index was at 123 points, said the July 2009 GCC Investor Sentiment Report. However, there has been a marked fall in confidence among international and regional investors towards the GCC, as seen by a 10.5-point drop in the GCC index. Much of the decline in the GCC index can be attributed to this month's significant fall in sentiment towards the state of current economic conditions, said the report. As expected, the biggest decline in investor confidence has been towards the UAE. "The UAE Investor Confidence Index lost most of June's gains and fell from 123.8 to 113.9 points," it said. "Oman, this month's only gainer in the region has now overtaken the UAE's index and is now ranked third in the GCC, hitting 119.2 points," added the report. All other GCC countries saw a decline of between two per cent and five per cent in their indices. However, Qatar and Saudi Arabia still command the highest level of investor confidence with their indices at 137.5 and 135.8 points respectively. Kuwait's index is still the weakest in the region, and has actually dropped back below the 100-point mark this month, to 98.3 points. Bahrain's index declined 2.7 points to 107.1, said the Shuaa Capital report. "It has proven to be a very challenging month for GCC economies, with the balance of respondents figure for investors' perception of current economic conditions sliding dramatically into the negative, with a reading that is down by more than 30 per cent this month to minus 15 per cent," it said. "However, a decline in investor sentiment towards current market conditions has not been restricted to just the GCC this month, as the balance of respondents for global emerging markets declined 14 per cent to minus five per cent while Bric [Brazil, Russia, India and China] countries fell 9.1 per cent to 13.3 per cent," added the report. The analysts at Shuaa Capital see current market perception driving much of decline. "The significant slide in the GCC index was primarily driven by a 31.9 per cent fall to minus 15 per cent in the balance of investors' perceptions of current regional economic conditions," they wrote. The UAE (minus 45 per cent) and Kuwait (minus 50 per cent) were the main contributors to this month's worsening perceptions of GCC's current economic conditions. On the contrary, Qatar's economy is perceived to be most the robust, as investors are much more positive on the economy's current condition, recording a balance this month of 20 per cent. Meanwhile, Bahrain saw only 6.7 per cent of investors positive on the economy, while due to a significantly high number of neutral responses (48.3 per cent), the balance was minus 26.7 per cent. Investor's opinion of Saudi Arabia's current economic state is a similar story to last month and remains very much polarised, with 36.7 per cent having a positive view and 30 per cent holding a negative view resulting in a balance of 6.7 per cent. Oman was predominantly "neutral" (60 per cent) and had a balance of minus 6.7 per cent, said the report. Despite the declines, Shuaa Capital stated investor confidence for GCC economies remains strong. "The six-month investor outlook for the GCC economy remains positive this month, with a balance of 53.3 per cent, albeit lower than last month's 65.2 per cent. "Despite the 11.8 per cent loss for the GCC, the six-month economic outlook for the region compares favourably against both Bric countries and global emerging markets, who both recorded slightly higher figures of 56.7 per cent and 55 per cent." Much of this 11.8 per cent drop can be attributed to the UAE, which remained positive, but lost 15 per cent of its balance, slipping to 36.7 per cent. Nearly all other GCC markets saw little change on investors' six-month outlook, with Saudi Arabia (58.3 per cent) and Qatar (58.3 per cent) jointly leading the way. Oman (40 per cent) was the only country to see much movement on last month, gaining 8.5 per cent to 40 per cent. Bahrain (30 per cent), Kuwait (23.3 per cent) made up the rest of the region. The report also highlighted that the UAE stock markets continue to be perceived as most undervalued. Stock markets across most of the GCC remain undervalued in the eyes of investors, although not to the extent of last month. Once again, it is the UAE stock markets leading the way, with the Abu Dhabi Stock Exchange and the Nasdaq Dubai seen to offer the best opportunities for returns according to investors, with both exchanges 26.7 per cent undervalued on balance. This is despite a 12.7 per cent decrease on last month's response for Abu Dhabi. Kuwait has seen a dramatic drop in investor sentiment towards its local stock market, falling 15.6 per cent on balance to minus 10 per cent indicating that overall, investors feel the stock market is actually overvalued. Bahrain (3.3 per cent), Oman (11.7 per cent) and Qatar (20 per cent