Dubai : The Gulf region is expected to post another year of solid gains on improving earnings momentum, strong investor sentiment and relatively attractive valuations, industry experts said. "The favoured markets remain Saudi Arabia and Qatar . We recommend a more stock selective approach to the UAE , and remain neutral on Kuwait and Oman on growth concerns," Fahd Iqbal , head of Middle East Research at Credit Suisse , said. The highlight of 2013 was the long expected MSCI upgrade of the UAE and Qatar to Emerging Market status. The move is likely to take effect in second quarter of this year, with the UAE accounting for 0.4 per cent of the index and Qatar accounting for 0.45 per cent. UAE markets hogged the limelight last year in part due to their inclusion in MSCI Emerging Index besides a healthy rebound in real estate markets and revival of business confidence. As a result, Dubai index produced stellar returns of 107.7 per cent and Abu Dhabi index registered strong gain of 63.1 per cent in 2013. "We see a risk of momentum slowing down in second half of this year as the positive impact of the UAE and Qatar entering the MSCI Emerging Market may be less than anticipated. Labour market reform poses a near-term risk to Saudi Arabia," he said. Qatar stock index returned 24 per cent in 2013. Saudi Arabia ended the year with a 31 per cent gain while Oman and Bahrain recorded healthy gains in the range of 17 per cent to 18 per cent in 2013. In Kuwait , the KSE price index delivered a gain of 27.2 per cent the Kuwait weighted index returned 8.4 per cent. "We estimate that the Gulf region could generate returns of approximately 15 per cent over the year. We also see a long-term upside for the UAE , but we remain neutral, as the market currently appears overheated, and recommend a stock selective approach instead," Iqbal said. Mohammad Ali Yasin , managing director at NBAD Securities , said the Dubai index can cross the 4,000-point milestone in 2014. He said the rally in Dubai index is the continuation of the correction on the recovery from the downturn of 2008. Many of the developed markets have reached or exceeded the 2008 levels in 2013. According to a new report by the Kuwait Financial Centre (Markaz), real estate sector shares in the Gulf will be the driving factor underpinned by banking and financial services while petrochemicals sector is expected to remain muted this year. The report expects full-year earnings in 2013 to grow by 10 per cent for the Gulf region. The full-year earnings are expected to be at 12 per cent this year. "Real estate shares are recovering, Dubai in particular. [The] Abu Dhabi realty sector still has room for growth in 2014. The recovery in [the] Abu Dhabi real estate market has not reached the same level as in Dubai ," Yasin said. He said that the capital appreciation of stocks in 2014 will be the reflection of the better spending and the economic growth will provide positive returns to shareholders. "Emaar will be a growth story that will continue next year also before it touches a peak in 2015. Arabtec is a strong story and the capital increase it has done in 2013 will help it achieve higher revenues going forward. Aldar will make remarkable gains in 2014 but Nakheel will move sideways," Yasin said. Iqbal, meanwhile, said the current positive trend in earnings revisions is likely to continue, as robust growth in Saudi Arabia and Qatar is further supported by the UAE's recovery. "We believe earnings upgrades, in aggregate, could amount to high single-digit levels again in 2014, as downside risks to growth in Saudi Arabia can be offset by acceleration in earnings upgrades in the UAE ," he said. Trading volumes registered a substantial increase in 2013, driven largely by local and regional retail investors. "We see limited scope for a respite in this trend: anecdotal evidence points to further inflows from high net worth and family office investors, while fund-flows data point to resilient interest coming from the broader retail investor segment," Iqbal said.
Most Popular Stories
- Dmytro Firtash, Ukrainian Billionaire, Arrested in Vienna
- Obama, Ukraine Discuss Russian Incursion in Crimea
- Venezuela Death Toll Reaches 28
- Russia Holds Large Military Drills in South
- Calumet Photo Files for Bankruptcy
- Navarro Celebrates 2 Years of Vida Mia
- Herbalife Puts Off Meeting for Icahn Talks
- Ukraine Loan Delayed While Congress Goes on Vacation
- Ukraine Moves Closer to Joining E.U.
- Federal Gov't Deficit Continues to Decline