Increased interest of foreign investors in the UAE and Qatari markets following the MSCI upgrade is also expected to contribute to the up-move.
Amongst others, continued momentum on reforms, healthy economic growth, investment in non-oil sectors, stabilisation of oil prices, recovery in real estate sector, better corporate earnings and compelling valuations are likely to be the key positive triggers for the GCC equity markets.
According to Bloomberg consensus estimates, earnings of equities constituting the MSCI GCC index are expected grow a healthy 10.3 per cent year-on-year in 2013.
The broad macro environment for 2013 also encourages this growth as the end of fiscal cliff in the US and quantitative easing in emerging markets as well Europe would provide much needed impetus.
The GCC equity markets offer investors a unique combination of strong corporate earnings growth, high dividend yield with reasonable valuations. The markets are just starting to get on the radar of international investors and also being actively considered for intra GCC cross investments.
“Hence, we believe that the markets in the GCC are on the cusp of huge growth in terms of size and continuing strong market performance,” according to Alpen Capital’s newly created Alpen Asset Advisors report.
International money will flow, driven by market friendly reforms by the regulators. Reforms could focus on easier listing norms for broader markets, higher foreign ownership limits and single registration for GCC wide investment ability for foreigners.
Alpen Asset Advisors highlights the existence of certain key themes that would be favourable for the GCC markets in 2013.
The report mentioned: ‘improving liquidity and declining volatility, stabilisation in oil prices and rising government spending, recovery in the real estate sector, select sectors in focus, retail, banking, transport and logistics’ are the themes.
“Although the GCC economies are poised for growth, they do face several challenges such as excessive reliance on oil, political instability and global slowdown. These economies also face other potential risks, particularly external credit risk, as GCC is one of the major creditors in global financial markets. Despite these factors the GCC stock markets are expected to capitalise on the robust macroeconomic outlook for the region in 2013,” the report added.
