Investor confidence in the GCC states fell in February as uncertainty around the Dubai World debt restructuring plans weighed on investor sentiment, a Shuaa Capital survey revealed.

However, investor outlook for the GCC's economic performance during the next six months remains in positive territory, it said.

The Shuaa GCC Investor Confidence Index fell 8.9 points in February. After December's significant second half gains which followed the announcement to repay the Nakheel '09 Sukuk in full, the GCC Index has now recorded two months of consecutive declines, with the index reading 105.6 points, it said.

The UAE (-11.7 points), Saudi (-8.7 points) and Qatar (-5.8 points) indices lead the decline. The UAE Index now stands at 84.4 points, just 1.9 points off of its all time low following the Dubai World "standstill' announcement in late November last year.

Specifically, the survey asked members of the professional investment community if they require more transparency and disclosure on the Dubai World debt situation before they could make investment decisions in regional stock markets. Unsurprisingly, there was a resounding "yes" for all UAE stock markets. Interestingly, there was also a "yes" response for all other regional markets, indicating an inextricable link between GCC markets.

Oliver Schutzmann, chief communications officer of Shuaa Capital and author of the Investor Sentiment Report, said: "The GCC is operating under a cloud of uncertainty as the professional investment community awaits the next move regarding the Dubai World restructuring efforts.

Trading volumes are low, five-year credit default swaps for Dubai - the cost of insuring debt against default - rose as high as 651 basis points in February1, and both local and international investors remain on the sidelines.

"As such, it comes as no surprise that investors are erring on the side of caution and are not over confident towards the UAE and wider GCC," added Schutzmann.

"However, it is  important to note that the six-month investor outlook for the GCC's economic performance as a whole remains in positive territory, with 30 per cent of investors expecting improving economic conditions, 47.5 per cent seeing no change and 10 per cent anticipating a decline. This indicates that despite short-term uncertainty, investors expect economic conditions in the GCC to improve within the next six months."

This view is also reflected in the six-month GCC sector profitability outlook. Apart from Real Estate, Construction and Materials as well as Banks and other Financial Institutions, all sectors are expected to record strong profitability growth over the next six months.

Telecoms, Media and Technology are, once again, expected to be the most profitable, with 35 per cent on balance.  Pharmaceuticals and Transportation and Logistics both have on balance figures of 30 per cent after slight gains, while the Utilities sector is not far behind at 25 per cent.

Meanwhile, a strong gain of 15.5 per cent in the Heavy Industries sector took it to 22.5 per cent on balance; this is on par with the Consumer and Retail industry.
Investors' six-month outlook for regional stocks is positive this month for all regional markets except the Dubai Financial Market and Nasdaq Dubai.

The view towards the Saudi Stock Exchange is relatively unchanged and still expected to set the standard for the region with 45 per cent of the balance of investors anticipating stock prices to rise. Also in healthy positive territory is the Qatar Stock Exchange, which had an on balance figure of 30 per cent for February. The Oman Stock Exchange and Abu Dhabi Stock Exchange are also expected to see some gains over the next six months, with on balance figures of 12.5 per cent and 10 per cent respectively. - TradeArabia News Service