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Most Mena equity markets ended 2010 in positive territory, despite a lack of interest from foreign investors and a drop in trading volumes, according to the latest markets report from Rasmala Investment Bank.
The year was marred with regional concerns regarding debt restructurings, corporate governance unease and liquidity issues, but set against a more positive macroeconomic backdrop of a recovery in growth and higher oil prices. Regional stock markets were also affected by concerns about economic recovery outside the region and European sovereign debt.
For the year, Qatar ended 2010 on a strong note and was the best performing market in the region, following the successful bid to host the 2022 soccer World Cup. Morocco and Tunisia were also leaders in the Mena markets, outperforming the MSCI Emerging Markets Index, as well as the S&P 500 and FTSE 100 indices.
Driven by strong performances from the Qatari and Egyptian banking sector in particular, banks was the best performing sector across the region in 2010, gaining 23 per cent. Real estate was the worst performing sector, negatively impacted by some of the UAE names such as Aldar (-54 per cent in 2010) and Union Properties (-46 per cent).
The UAE markets got off to a slow start to the year as uncertainty surrounding Dubai's debt crisis overshadowed market performance. The long awaited Dubai World and Nakheel restructuring proposal from the Government of Dubai came in late March. The terms were well received by investors as the DFM and ADX rallied on the back of the announcements and the sukuk and bonds of the affected companies also appreciated.
Despite another rally in September on the back of positive news of Dubai World finalizing its $24.9bn restructuring deal with creditors and FTSE's upgrade of the UAE to secondary emerging status, the DFM and ADX both finished in the red on the year.
The DFM fell 9.6 per cent while the ADX slipped 0.9 per cent. Axiom cancelled its IPO, which would have been the first in the UAE in two years, because of widespread concerns about market conditions and liquidity. Consumer staples was the best performing sector on the DFM, gaining 20.8 per cent, while industrials was the leading sector on the ADX, gaining 26.3 per cent. Real estate was the worst performing sector on both the DFM and ADX, falling 34.6 per cent and 37.5 per cent, respectively.
The UAE's Federal National Council approved a federal budget of AED41bn for 2011 and forecasts revenue of AED38bn. The IMF is projecting real GDP growth of 3.2 per cent in 2011, compared with 2.4 per cent in 2010. Dubai's economy is projected to expand more than 2 per cent in 2011 from 0.5 per cent in 2010. The UAE is forecasting a federal budget deficit of AED3bn in 2011, according to the ministry's director general, Younis Al Khoori.
In 2011, the UAE market could benefit from a potential MSCI emerging market upgrade, a decision which will be made in the middle of the year.
The Tadawul index ended the year up 8.2 per cent, following a 27.5 per cent gain in 2009. The Saudi market suffered badly in May, impacted by the decline in oil prices on the back of the European debt crisis. Petrochemicals stocks recovered by the end of the year on higher commodity prices and gained 17.1 per cent. Market bellwether, Saudi Basic Industries Corporation (SABIC), gained 27.0 per cent on the year. Healthcare was the best performing sector, gaining 17.9 per cent, while insurance was the worst performing sector, falling 32.5 per cent.
Saudi Arabia approved SAR580bn as its 2011 budget and will carry a SAR41bn deficit, while the 2010 budget had a surplus of SAR109bn. The Saudi Finance Minister, Ibrahim Al-Assaf, said that the surplus of the 2010 budget will be added to reserves and can be used to cover deficits. Public debt fell to SAR225bn in 2010.
Saudi Arabia may become the largest issuer of Islamic bonds and overtake Malaysia in 2011, according to the director of the S&P 100 Pan Islamic Market Index. The IMF expects Saudi Arabia's economy to expand 4.5 per cent in 2011 as government-financed projects help spur growth in the Arab world's biggest economy.
The kingdom considered opening its market to foreign investors within one to two years, according to the chairman and chief executive of Saudi Arabia's Capital Market Authority.
The Kuwait stock exchange had a volatile year that saw the index dip 0.7 per cent in 2010. The banking sector was the best performer, up 41.9 per cent, while real estate was the worst, down 20.5 per cent on the year.
Early in the year, after months of negative performance, the index's heaviest constituent by market capitalization, Zain, surged on news that the company was to sell 46 per cent of some of its African assets in a $1.7bn deal to Bharti Airtel. Late in the year, Etisalat was in talks to buy 46 per cent of Kuwait's Zain.
In March, the Kuwaiti parliament passed the Capital Market Law (CML), a move aimed at creating investor protection and transparency, as well as bringing in more foreign investment.
Kuwait posted a KWD5.6bn preliminary budget surplus in the first seven months of the fiscal year after generating KWD11.5bn in revenues and spending KWD5.9bn, according to the Finance Ministry.
The DSM20 index was the top performer in the Mena region, surging 24.8 per cent in 2010.
The Qatari market made a strong rally late in the year on the back of winning the bid to host the World Cup in 2022 and 3Q2010 nominal GDP growth of 21 per cent. The banking sector gained 31.3 per cent on the year, with Qatar National Bank rising 61.3 per cent.
Industries were among several strong performing stocks gaining 21.0 per cent, due to a considerable increase in petrochemical and fertilizer prices. Insurance was the leading sector on the DSM20 for the year, gaining 34.5 per cent, while real estate was the worst performing sector, falling 12.1 per cent in 2010.
The IMF projects 18.6 per cent economic growth in Qatar in 2011 while inflation remains subdued. Qatar Prime Minister, Sheikh Hamad Al-Thani, said that Qatar has no plans to issue bonds for the World Cup. Al-Thani added that 70-80 per cent of the World Cup cost will be covered by government funds and that the infrastructure will take seven years to complete. S&P does not project a significant increase in Qatar's sovereign debt level.
In 2011, the UAE and Qatar markets could benefit from a potential MSCI emerging market upgrade.
The MSM30 Index ended the year in the green, up 6.1 per cent, while the banking sector went up 14.9 per cent with Bank Muscat gaining 46.0 per cent.
The telecoms sector fell 1.4 per cent. Nawras shares were listed on the stock market in November but did not manage to attract as much retail interest as hoped with retail buyers taking up only 38.5 per cent of the IPO, despite 70 per cent being reserved for retail investors. Renaissance Services was among the leaders, up 45.0 per cent.
The energy sector made the largest gains on the year, up 27.6 per cent, while the insurance sector was the worst performer, down 26.8 per cent
The government of Oman plans to increase spending by 13.2 per cent in 2011 from a year ago, citing a statement from the economy ministry. The 2011 budget forecasts government spending to reach OMR8.13bn.
The Egyptian stock market was one of the top performers in the Mena region this year, gaining 15 per cent on mostly domestic investment, but was also one of the favorite markets in the region for foreign investors.
The banking sector surged 73.4 per cent on the year while telecoms fell 15.1 per cent. Consumer staples were the worst performing sector on the year, falling 23.3 per cent.
There were two IPOs in Egypt in 2010 - Juhayna Food Industries and Orascom Telecom. Orascom Telecom kept a high profile in the news due to the on-going dispute with the Algerian government over Orascom's subsidiary, Djezzy. Furthermore, Orascom sold its stake Tunisiana to Qtel for $1.2bn.
Elsewhere, shares in TMG Holding were affected by a dispute with the government regarding land sale for its Madinaty projects.
Egypt is planning to increase its annual infrastructure budget to EGP100bn over the next five years, according to finance minister, Youssef Boutros-Ghali. He added that although the IMF is predicting a 5.5 per cent growth in the Egyptian economy, economic growth would actually reach 6 per cent in FY 2010, 7 per cent in FY 2011 and 8-8.5 per cent in FY 2012. He also said that Egypt has adopted a stimulus plan with the aim of injecting USD1.72-3.44bn into the economy in 2011.
Egypt is targeting a budget deficit of 7.5 per cent in 2011 while it aims to double annual foreign investment to USD15bn within the next couple years, according to Trade & Industry Minister, Rachid Mohamed Rachid.
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