Bahrain's stock market recorded a gain of about 18 per cent last year, according to an analytics firm.

In its GCC markets outlook for the year, Kuwait Financial Centre (Markaz) said most GCC markets registered double-digit gains last year.

"Their performance was on par with developed markets and better than emerging markets," the report said.

The S&P GCC Composite index closed at 118.6, gaining 24.4 per cent last year.

Markaz said it expects last year's earnings for the GCC as a whole to have grown by 10 per cent, with this year's full year earnings estimated to come in at 12 per cent.

Real estate is seen as the driving factor for GCC stock markets underpinned by banking and financial services.

Markaz believes that petrochemicals sector would remain muted, whereas corporate earnings which have been moderate for the past years in Saudi Arabia and Qatar could surprise on the positive side.

At the end of first half of last year, the firm said it had neutral views on Saudi Arabia and Kuwait and positive views on the UAE, Qatar, Oman and Bahrain.

Markaz said it has been proved mostly right except for Saudi Arabia, which rallied higher as talks of regulatory reforms to open up the equity market for foreign investor''s direct participation boosted sentiments.

"UAE markets, Dubai and Abu Dhabi, though positive surpassed our expectations," the report said.

The highlight 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, with UAE accounting for 0.4 per cent of the index and Qatar accounting for 0.45 per cent.

Economic growth in GCC is expected to sustain at 4 per cent this year, driven largely by social spending, initiation of infrastructure projects and large-scale subsidies amidst unrest in neighbouring nations.

Increasing oil production elsewhere and easing of sanctions in Iran is further expected to put downward pressures on global oil price.

With most GCC nations holding back their investments to ramp up production capacity, oil-based real GDP growth is expected to slump from 5.4 per cent in 2012 to 0.4 per cent last year.

Markaz feels that though the break-even price of oil is still much lower than the prevailing market price, the rates at which the break-even price had increased over the past two years is alarming, particularly in the case of Kuwait (32.6 per cent), Qatar (44.2 per cent) and Oman (19 per cent).

Ongoing shale gas revolution in US, slowdown in commodity super cycle and a sluggish global outlook presents immense challenges for GCC region economies which have been excessively reliant on oil receipts to fund growth in the long-term.

Inflation in GCC is expected to rise only marginally from last year's levels, as commodity prices (especially food) are relatively benign.

According to the report, fiscal surplus though robust is expected to be on the declining trend, as government expenditures keep rising while oil revenues remain moderate. Valuation, on a standalone basis, remains cheap in Oman and Bahrain, Markaz said.-TradeArabia News Service