Surge in liquidity drives capitalisation - Emirates24|7

Surge in liquidity drives capitalisation

Swelling domestic liquidity sharply pushed up regional bourses last year. (PATRICK CASTILLO)

Swelling domestic liquidity that is believed to have boosted inflation in the Gulf also sharply pushed up regional bourses last year after they suffered a market capitalisation loss of almost $427 billion (Dh1.57 trillion) in 2006, a study said yesterday.

The surge in liquidity because of a sharp rise in oil prices has also allied with better bourse regulation and stock splits in regional markets to bring in more players and largely stimulate share dealing, said the study by the Kuwaiti-based Global Investment House (GIH).

In its GCC Investor Guide for 2007, GIH provided a list of the 100 largest companies listed on the bourses of the six-nation Gulf Co-operation Council and the report showed Saudi Arabia and the UAE dominate the list.

"With liquidity in the markets improving substantially in the past few years, the capital markets of the GCC witnessed a surge in activity and increased depths in terms of the number of new listings and market capitalisation.

"The volume of shares traded on those markets improved as the regulators in many bourses allowed stock split to entice retail investors. During 2007, all GCC bourses recorded high growth of between 27 and 60 per cent and this helped them to offset the losses of nearly $427bn they suffered in 2006, accounting for about 42.6 per cent of their 2006 market capitalisation."

The report said last year was one of the best years for GCC stock markets and was in sharp contrast with the previous year. "The performance of the GCC stock markets in 2006 was very bad following the correction process during that year as a subsequence to the overstated and unjustified price rise in previous months."

From about $691bn at the end of 2006, the combined market capitalisation of the GCC bourses leaped to nearly $1.13trn at the end of 2007. Listed companies also increased from 579 to 718 during the same period.

A breakdown showed Saudi Arabia remained by far the largest GCC bourse in terms of capitalisation, standing at $519bn at the end of 2007. It was followed by the UAE at $257bn, Kuwait at about $210bn, Qatar at $95bn, Bahrain at $27bn and Oman at nearly $23bn.

Turnover, or the value of traded shares, stood at $682bn in Saudi Arabia, $151bn in the UAE, $135bn in Kuwait, $29bn in Qatar, $5bn in Oman and about $1.1bn in Bahrain.

The figures showed the largest 100 listed companies accounted for nearly 79 per cent of the total market capitalisation at the end of 2007, standing at nearly $890bn. The 100 firms alone recorded a growth of $314bn in 2007. Saudi Arabia accounted for nearly 53 per cent of the market capitalisation of those 100 companies, standing at nearly $477bn. The UAE companies within that list had a capitalisation of about $179bn, or 20 per cent of the total. Kuwait, at $129bn, accounted for about 14 per cent while Qatar amounted to nearly nine per cent and Oman and Bahrain to 1.6 and 0.89 per cent.

Saudi Arabian Basic Industries Corporation, or Sabic, one of the world's largest petrochemicals producers, emerged as the largest listed company in the Gulf region at the end of 2007, with a market capitalisation of about $132bn.