Regional markets 'offer good value'
Manama, September 25, 2008
While the sharp stock market declines across the region in 2006 were largely anticipated, the carnage witnessed by the GCC equity markets in the past few weeks has caught almost everybody off guard.
That is the view of Global Investment House which argues that in the long term the GCC markets still offer good value, though it is not predicting a swift bounce back, said a report in our sister publication, the Gulf Daily News.
'The market slide that seemingly started as a result of the conventional summer doldrums turned into a free fall due to a confluence of a number of factors,' said Global head of asset management, Shahid Hameed.
'The MSCI GCC Index - a benchmark that measures the performance of the GCC equity markets - is down 29 per cent this year to date and has shed an even more alarming 33pc since touching its recent peak in January this year.
'Given the fact that we now live in an increasingly globalised financial market, we could not have escaped the international markets turmoil which has had a negative knock on effect on regional equities,' he said.
'Most of the foreign money managers that had flocked to the regional equity markets in search of healthy returns just about a year ago started fleeing some time during the summer.
'Although foreign fund flow into the region had turned negative since the early part of this year, the trend gained momentum in mid summer.
The change in the direction of the international fund flows unfortunately coincided with the traditionally low activity summer months.
'The spate of corporate scandals that emerged out of Dubai also rattled the markets and resulted into a crisis of confidence of sorts in Dubai and the sell off intensified across the UAE bourses.
'The long term story for the region remains intact,' he added.
'Fundamentals continue to look attractive.
'However, we would advice caution and stock selection would be the key going forward.
'Investing in companies that enjoy long term favourable fundamentals would be the key for successful investing in the GCC equities going forward,' he said.
'Despite the relative attractiveness of the GCC equity markets, when the markets decline so much so fast, one would not generally expect them to revert to their path very quickly.' - TradeArabia News Service