nurul7619
January 16th, 2007, 04:31 PM
GCC stocks set to surge 25pc in ’2007
16 January 2007
BY ISSAC JOHN
(Chief Business Reporter) DUBAI — Stock markets in the GCC, particularly Kuwait, Saudi Arabia and UAE, are projected to record more than 25 per cent growth in 2007, in line with the earnings growth expected from these markets, according to forecasts made by a leading investment consultancy firm.
The Kuwait-based Global Investment House in its forecast said markets across GCC, which plunged 49.3 percent in 2006, looked attractive in 2007 compared to other emerging bourses at current valuation.
"At current price levels, many stocks represent a good buying opportunity and provide a case of careful stock selection and accumulation."
In its GCC Investment Strategy and Sectors Outlook for 2007, Global said current valuation is closer to fundamental levels and thus appearing cheaper than many other emerging markets. "The recent fall in the market has given opportunity to the institutional as well as retail investors to do "bottom-fishing" in the markets and we believe that markets will turn corner in 2007."
The report said in markets like Kuwait and Saudi Arabia, which are trading at a P/E ratio of 11.5 and 15.9 respectively, multiples have scope to expand further. (In mid 2005 average P/E ratios on the Saudi Arabian and Abu Dhabi bourses were 47 and 34 respectively). Oman, Qatar and Bahrain are also expected to register moderate growth rates in the range of 17 per cent to 23 per cent.
According to Global, the fundamentals of GCC economies and particularly that of the corporate remain strong. "The volatility in the markets are the part and parcel of any emerging capital market growth story but it is the ability to absorb these shocks which will determine the strength of the respective markets. The financial sector is awash with funds and corporate are taking advantage of easy availability of capital to fund expansion, both regionally as well as internationally."
It noted that investment funds and private equity players are getting strong support from the investors in terms of increased investment in both Islamic as well as conventional funds to fund the deal flows. "Apart from looking at the interesting opportunities in the region, the investment companies/corporate are looking at other promising markets outside the Middle East Africa region to diversify their investment base/revenues. This is crucial as it will hedge their risk of operating in a single market."
The report said institutional investors will start taking positions in the market taking into account the valuation prevailing in selecting stocks. For example, the P/E of Saudi Arabia which at one point reached mid-40s is now trading at more stable mid teens, comparable with other emerging markets, it pointed out.
"While economic fundamentals continue to remain positive in the region, the market participants seem worried about growing concerns on increased volatility in stock prices. This has led to a bearish mindset in many of the regional stock markets based on expected slowdown in corporate earnings this year and a possible liquidity squeeze. Liquidity is only one of the factors, which has been driving the markets, but important thing is the overall fundamentals and structural changes in the economy which is keeping this liquidity in the economy and is going to be the key factor in driving the stock markets further from the current levels. Oil price seems to be stabilizing above $50, putting the GCC economies on a sound footing. Governments have also become reforms oriented, which augurs well for the longer term overall growth of the economies," it said.
However, the strong interest in the primary markets is likely to stay as investors continue to scout for quality issues, the report said. "Liquidity is not going to be major problem as long as the oil prices and investment spending remains at high levels. However, it is the re-entry of retail investors, those very individuals who burnt their hands in the market correction, which would be interesting to watch."
"Going forward, we believe that the robust state of the economy has created enough wealth to offset any medium term bearish trend in the markets. Apart from these fundamental factors, we expect the market to get a much-needed leg-up from a more stable geopolitical situation. GCC union, intra-regional investments and common investment projects are providing and will provide more trading and investment opportunities. Also, with the capital expansions and new issues lined up in 2007, the free float is likely to increase in the market making the markets more liquid and deep," the Global report said.
___________________________
http://www.khaleejtimes.com
16 January 2007
BY ISSAC JOHN
(Chief Business Reporter) DUBAI — Stock markets in the GCC, particularly Kuwait, Saudi Arabia and UAE, are projected to record more than 25 per cent growth in 2007, in line with the earnings growth expected from these markets, according to forecasts made by a leading investment consultancy firm.
The Kuwait-based Global Investment House in its forecast said markets across GCC, which plunged 49.3 percent in 2006, looked attractive in 2007 compared to other emerging bourses at current valuation.
"At current price levels, many stocks represent a good buying opportunity and provide a case of careful stock selection and accumulation."
In its GCC Investment Strategy and Sectors Outlook for 2007, Global said current valuation is closer to fundamental levels and thus appearing cheaper than many other emerging markets. "The recent fall in the market has given opportunity to the institutional as well as retail investors to do "bottom-fishing" in the markets and we believe that markets will turn corner in 2007."
The report said in markets like Kuwait and Saudi Arabia, which are trading at a P/E ratio of 11.5 and 15.9 respectively, multiples have scope to expand further. (In mid 2005 average P/E ratios on the Saudi Arabian and Abu Dhabi bourses were 47 and 34 respectively). Oman, Qatar and Bahrain are also expected to register moderate growth rates in the range of 17 per cent to 23 per cent.
According to Global, the fundamentals of GCC economies and particularly that of the corporate remain strong. "The volatility in the markets are the part and parcel of any emerging capital market growth story but it is the ability to absorb these shocks which will determine the strength of the respective markets. The financial sector is awash with funds and corporate are taking advantage of easy availability of capital to fund expansion, both regionally as well as internationally."
It noted that investment funds and private equity players are getting strong support from the investors in terms of increased investment in both Islamic as well as conventional funds to fund the deal flows. "Apart from looking at the interesting opportunities in the region, the investment companies/corporate are looking at other promising markets outside the Middle East Africa region to diversify their investment base/revenues. This is crucial as it will hedge their risk of operating in a single market."
The report said institutional investors will start taking positions in the market taking into account the valuation prevailing in selecting stocks. For example, the P/E of Saudi Arabia which at one point reached mid-40s is now trading at more stable mid teens, comparable with other emerging markets, it pointed out.
"While economic fundamentals continue to remain positive in the region, the market participants seem worried about growing concerns on increased volatility in stock prices. This has led to a bearish mindset in many of the regional stock markets based on expected slowdown in corporate earnings this year and a possible liquidity squeeze. Liquidity is only one of the factors, which has been driving the markets, but important thing is the overall fundamentals and structural changes in the economy which is keeping this liquidity in the economy and is going to be the key factor in driving the stock markets further from the current levels. Oil price seems to be stabilizing above $50, putting the GCC economies on a sound footing. Governments have also become reforms oriented, which augurs well for the longer term overall growth of the economies," it said.
However, the strong interest in the primary markets is likely to stay as investors continue to scout for quality issues, the report said. "Liquidity is not going to be major problem as long as the oil prices and investment spending remains at high levels. However, it is the re-entry of retail investors, those very individuals who burnt their hands in the market correction, which would be interesting to watch."
"Going forward, we believe that the robust state of the economy has created enough wealth to offset any medium term bearish trend in the markets. Apart from these fundamental factors, we expect the market to get a much-needed leg-up from a more stable geopolitical situation. GCC union, intra-regional investments and common investment projects are providing and will provide more trading and investment opportunities. Also, with the capital expansions and new issues lined up in 2007, the free float is likely to increase in the market making the markets more liquid and deep," the Global report said.
___________________________
http://www.khaleejtimes.com