Acknowledging that the GCC capital market is a good idea, ENBD emerging market strategist Mark McFarland told Gulf Times that it (such a move) would integrate a lot of the individual markets and the regional market would become deeper.
The GCC common currency union, having missed many deadlines, now appears to be in backburner with Oman and the UAE already opting out of it.
“An economic region is a far more effective if it has a single currency but there are some downside risks since the economies (in the Gulf region) are not in the similar growth path,” he said.
Expressing hope that the region would have a single currency, he said it may not have all the GCC countries together but the experiment could start with a small group.
“The eurozone experiment may break but the common currency is still worth exploring here,” McFarland said, highlighting that one thing that worked well with Europe was the common market.
At the recently held GCC Regulators Summit, Muscat had said it was extremely urgent and necessary that the GCC countries adopt a unified economic, financial and legislative stand within the international organisations particularly IOSCO (International Organisation of Securities Commissions) so that they could positively influence the region.
Asked whether the proposed common currency – which is now on a go-slow mode after the global financial crises – should be pegged to dollar or a basket of currency; McFarland said it should a freely floating currency.
“It has to be stand-alone and it has to have strong backing of monetary policy behind it,” McFarland said, underscoring the need for an independent central bank.
For that to happen, he said, the region should have a proper bond market, which in turn, should call for a developing local currency bond market.
Highlighting that many of the South Asian countries were able to develop local currency bond markets in a short span of time, he said once that happens in the Gulf, the region could have a proper yield curve to gauge the price of risk.
Once the sovereign debts are able to make its way into the market, it would be it easy for the corporate debt market to be traded, according to him.
“The development of corporate debt market is expected to see here very quickly,” he said.
Qatar is trying to build a domestic sovereign bond yield curve. Although the government is running large fiscal surpluses, it has issued a number of conventional and Islamic bonds during 2009–11, with a view to facilitating the development of a
domestic bond market.
The Qatar Exchange had in December witnessed the trading of Treasury Bills as part of broader measures to have bonds and sukuk listed.
