Gulf markets sink in '11 after Arab unrest
Dubai, December 30, 2011
Most Gulf markets ended the year in deep losses on Thursday, with the exception of Qatar and Saudi Arabia, after grappling with shaken local confidence and concerns over the unresolved euro zone debt crisis.
The Arab spring revolts hit Gulf bourses early in the year but they managed to recover the losses as local governments dished out large handout to stave off unrest, including $93 billion in social spending announced by Saudi Arabia in March.
The euro zone debt crisis and a fragile state of US economy has kept foreign investors at bay, while local investors also cut risk in equities.
UAE markets edged to a higher close on Thursday but are not far from their multi-year lows hit a few sessions earlier on lack of interest in local equities from institutional and foreign investors as volumes evaporated from the bourses.
In recent months, these markets have been tracking global markets, though tighter on the downside, in the absence of local catalysts. Market participants expect them to continue taking direction from world equity moves next year.
Property stocks were the main drag on the index for the year, as little signs or recovery in the sector since the 2008 bubble-burst failed to entice investors.
"In the UAE, companies' growth is still not visible," said Shakeel Sarwar, asset management head at investment bank SICO in Bahrain. "This perhaps is one of the reasons why the market has also underperformed. The real estate sector will continue to struggle next year -- there are no signs of improvement."
Dubai, whose property collapse led to a debt crisis, launched a real estate investment fund worth up to $1 billion with Canada's Brookfield Asset Management in a bid to revive the battered sector and restore investor confidence.
The completion of developer Nakheel's restructuring in August also brought gave confidence to real estate investors.
While Dubai's property market showed some signs of stability, Abu Dhabi continued its downslide with fears that more may be coming.
Aldar Properties, the emirate's largest property firm by market value, rose 9.5 percent on the final day of trading after it received a $4.57 billion lifeline from the Abu Dhabi government which bought its key assets and retired a loan.
This was the second bailout for the indebted developer in 2011 with Abu Dhabi pumping over $10 billion into the company.
Dubai's index ticked up 0.5 percent to 1,353 points, trimming 2011 losses to 17 percent. Abu Dhabi's benchmark advanced 1.5 percent to 2,402 points, curbing losses this year to 11.7 percent.
Faring the best among its peers, Qatar's index ended 0.4 percent lower at 8,779 points, up 1.1 percent in 2011, as the only regional bourse gaining in the year.
"I don't think Qatar is expensive-- there is more upside potential considering its corporate earnings and economic growth rate," said Sarwar.
Qatar's economy is estimated to grow by 17.5 percent in 2011, according to a Reuters December poll.
In Saudi Arabia's the index of the largest Arab bourse has lost 3.1 percent in 2011. It eased 0.3 percent on Thursday, ahead of its last trading day of the year on Saturday.
Petrochemicals stocks pressured the market, as they tightly tracked oil price volatility, while subdued growth in banking stocks also weighed.
"We see two key trends for Saudi Arabia is 2012 - the global economy uncertainty and how that will affect us and volumes shifting from the region to the kingdom," said Asim Bukhtiar, head of research at Riyad Capital.
"Investors will look more at companies with a domestic focus that are not dependent on exports."
Saudi Arabia is pressing ahead with a long-awaited plan to open up the largest Arab bourse to foreigners and it hopes to formalise its rules by Jan. 15, a source told Reuters. -Reuters