Comparatively attractive valuations to other emerging markets’ stocks, high oil prices and sustained economic growth in the region will mean that Middle East stock markets will be largely insulated from any further turmoil on global markets this year.
“The Middle East is one of the few regions in the global economy where the economic cycle should remain largely insulated from slower growth in the United States and Europe, as long as oil prices remain high [as we expect],” UBS said in its Global Emerging Markets Strategy report.
“Correlations with global equity markets tend to be low compared with other regions, because Middle Eastern markets are not fully integrated with global markets [due to certain restrictions].”
Arab stock markets have seen mixed performances this year, with the Dubai Financial Market down 3.79 per cent and Saudi’s Tadawul index 13.4 per cent lower after yesterday’s session.
However, the Abu Dhabi Stock Market is 3.63 per cent higher this year, and Oman, Qatar and Kuwait’s indices are all in positive territory so far.
However, UBS believes that corrections in share prices have largely been triggered by the sell-off in global equities.
“Neither valuations, local macroeconomic conditions nor liquidity in the local markets justify the correction, in our view,” UBS said in the report.
The most attractive sectors are diversified financials, materials, staples and healthcare, the strategy report added.
Arab shares to be top picks