Gulf stocks show 'outstanding' recovery in 2013

All GCC indexes recorded double-digit growth but the rapid rise is not likely to continue in 2014

By Courtney Trenwith

Gulf stock markets soared in 2013, with every index recording well above double-digit growth and two of the largest reaching five-year highs.

Analysts said the significant increases signified the region was recovering well from the 2008-09 stock market crashes related to the global financial crisis.

“The local economy came back on track and the market caught up with that; it’s really a simple analysis,” MENACORP CEO Fathi Ben Grira told Arabian Business.

According to Ben Grira, cash-rich investors returning to the Saudi Arabian market helped the Tadawul – the largest stock market in the region – reach a five-year high in December, putting on 25 percent in 2013.

The Dubai Financial Market (DFM) also repeatedly broke five-year records, doubling in the 12 months to more than 3200 points.

The DFM performance came despite a major dip in August amid fears of an international military intervention in Syria.

The DFM fell 7 percent on two consecutive days – August 27 and 28 – which was the largest decline of all major indexes internationally.

Analysts told Arabian Business at the time the fall was larger in Dubai due to a correction following massive gains this year. Investors had been waiting for an opportunity to cash in on their paper profits.

However, the index partially rallied on August 29 and had regained all of the losses by September.

Real estate and construction companies were the largest benefactors of the market recovery, with Deyaar Development increasing by 150 percent and Emaar growing by nearly 95 percent.

Banks also benefitted, with EmiratesNBD, Dubai Islamic Bank and Al Salam Bank – Bahrain all more than doubling their share price. Dubai Investments grew by 178 percent.

Abu Dhabi Securities Exchange grew by about 57 percent to 4113 points, while Qatar Exchange (up 26 percent) and Muscat Securities Market (up 20 percent) also performed well.

Bahrain’s 17 percent improvement was weaker than the other indexes, possibly due to some political instability in the kingdom.

Kuwait Stock Exchange is the only index not to maintain its significant gain throughout the year. It reached 8451.71 at close on May 29 – a 43 percent rise compared to December 2012 but has since lost 900 points, recording a 28 percent improvement for the year.

Dubai-based BNY Mellon vice president Peter Gotke said while indexes globally had performed better in 2013, those in the Gulf and in particular the UAE had seen “another year of outstanding recovery”.

“Clearly Dubai and the wider region have escaped the downturn quicker than most forecasters had predicted, and at a faster velocity than most developed markets,” Gotke told Arabian Business.

“In a highly competitive world for capital, investor sentiment has swayed from risk-on to risk-off in the past couple of years.

“With a slight shift to risk-on again, investors are looking for a return on their investment. To date, a yield story with the added value of the investment seeing high growth has been investment nirvana, and many have found the options in the Gulf to be irresistible.”

The launch of initial public offerings (IPOs) by numerous regional companies this year also signified a market recovery.

“This is set to be maintained with the outlook being for a healthy IPO pipeline in 2014,” Gotke said.

Unlike previous good times for the region’s stock markets, today’s investors are using cash rather than over-leveraging on debt, according to Ben Grira.

“During the booming period of the DFM and the ADX it was investors betting on the fact that the booming local economy would also reflect on the stock market and it was totally crazy and heavily leveraged similar to real estate,” he said.

“Today it’s quite different – valuations were really low [at the start of the year] and people are mostly buying with their own cash.

“It’s healthier and the authorities are managing the credit [levels].”

Analysts expect the next year to continue to bring positive growth for the region’s indexes, albeit slower than in 2013.

“Nobody is expecting that [similar growth to 2013] and nobody wants it,” Ben Grira said.

“We prefer a reasonable growth and of course growth all the time but something more reasonable would be good to keep it stable.”

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