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Qatar Registers Highest Growth Performance in GCC
By Jamal Al Majaida
negative trend in G.C.C markets, set in October and accelerating
in November, was partially reversed in December as five of the
six G.C.C markets ended the month higher with the performance of
the Qatari market being the most noteworthy as it ended up
almost 20% higher.
North African markets continued to impress with Egypt and
Morocco registering a growth of around 6% and 4% respectively.
The Jordanian market recovered some of its large losses towards
the end of the period and ended the month slightly lower.
The largest market, Saudi Arabia, was lower over the month as
trading volumes were markedly lower due to the onset of the Eid
holiday and persistently poor sentiment. The decline was broad
based across all sectors with the industrial sector performing
relatively well and ending the month unchanged. This was
primarily due to market heavy weight SABIC which was around 10%
higher at one point before profit taking erased the earlier
gains leaving it only slightly higher for the month. The Banking
sector was boosted by a powerful rally in SAMBA on the last two
days of trading but nevertheless ended the month lower.
Central Market Authority, the country's stock market regulator,
has fined a prominent investor for an amount equivalent to $
640,000, for carrying out fraudulent transactions and market
manipulation. Stern actions like these are likely to strengthen
the regulator's credibility and thus increase investor
confidence in the long run.
The demand for the IPO's continues to be reasonable as the APPC
(Advanced Polypropylene Company) IPO issue equivalent to US$
134million was oversubscribed by more than 3 times.
In corporate news, Saudi Cable Company announced that it won a
$123 million contract from Qatar General Electricity. The Savola
group, one of Saudi Arabia's leading industrial companies,
announced that it would invest more than $500 million in real
estate in the Kingdom and the Saudi Arabian Fertilizer Company
announced a proposal to distribute $160 million in cash
The Banking sector saw a series of positive announcements as the
international rating agency, Fitch Ratings upgraded Saudi
Hollandi Bank from BBB+ to A- and the Samba Financial Group was
granted a license by the UAE Central Bank to open branches in
the UAE. The Samba Financial Group also announced its intention
to pay a dividend of 1.7 S.R a share ($0.45) for the second half
of 2006 which represented an increase of 22% for 2006 payouts
versus 2005. This was well received by the market and led to a
strong rally in SAMBA shares on the last days of the month.
Valuations in the Saudi market continue to come down to
reasonable levels versus other regional and international
markets and we await a more sustained recovery pending a
positive set of 4th quarter 2006 results which may be the
catalyst to an improved market sentiment.
The U.A.E markets posted decent gains in December. The first two
weeks saw a marked increase in trading volumes as the market
absorbed the liquidity returning from the DFM IPO. This improved
tone proved to be somewhat short-lived as profit taking reversed
some of the earlier gains made in the first half of the month.
On the economic front, the news remains encouraging as a
recently released IMF report on the regional economic outlook
for the Middle East and Central Asia shows that the UAE economy
is performing better than its other G.C.C peers with average
non-oil GDP real growth of 9.9% in the 2002-2007 periods.
Importantly, the IMF is also predicting that inflation will come
down to around 5% from the present rate of close to 8%.
In corporate news, EMAAR properties disclosed that it has
projects worth USD 79.8 billion of which USD 60 billion were
from outside the UAE and may be considering listings in India
and Egypt to raise financing for projects in those countries
while Abu Dhabi based Souroh Real Estate launched its Central
Park project in Abu Dhabi at a construction cost of AED 500
million ($ 136 million). Dubai Investments announced the
acquisition of Saudi American Glass Co which led to increased
interest and trading volumes in this stock.
In other news the Telecom Regulatory Authority of UAE announced
that the telecom giant Etisalat and the new operator DU reached
an agreement on matters relating to interconnectivity. This is
expected to change the dynamics of the telecom market in the
country. In other telecom related news, there have been reports
that Etisalat is expected to buy a stake in a Kuwaiti mobile
operator but this was denied by Etisalat in an official notice
to the Abu Dhabi stock market. Nevertheless, the telecom sector
in the region continues to attract investor interest as
operators eye opportunities in markets beyond their home bases.
The U.A.E markets are trading at some of the most attractive
valuations in the region as corporate profit growth is forecast
to be strong through 2007 and we would expect a more sustained
recovery in this market as investor sentiment continues to
The Egyptian market managed to make good gains in December after
a slow start to the month. .The market gained momentum in the
latter part of the month with the major trend being the gains
posted by the smaller banks as investors reacted positively to
the policy decisions in the finance/banking sector and also on
speculation that some Gulf based banks were looking for
potential take over targets.
A continuation of economic reforms and an increasingly vibrant
consumer and corporate sector is expected to support the market
and lead to further gains in the medium term despite further
increases in interest rates to control rising inflation which
the Egyptian authorities are now expecting to remain high in the
The Kuwaiti market, despite early weakness, finished the month
on a mildly positive note. Trading activity picked up in the
middle of December and volumes were about 30% higher than the
beginning of the month with most activity being in the
investment, services and real estate sectors. Kuwait's second
largest mobile operator, NMTC (Wataniya) witnessed large trading
volumes and price increases along with MTC as speculation
increased that these companies were a target for other large
G.C.C based telecom providers.
In other news, National Bank of Kuwait, along with Saudi based
SAMBA and Qatari Doha Bank, has been granted a license to
operate in the U.A.E.
The Kuwaiti market regulator continues to crack down on market
manipulators with the bourse confirming that it barred
shareholders in 13 listed firms, including Gulf Bank and Ahli
Bank, from selling shares for six years for breaking disclosure
rules. We see this as a welcome development in that it shows
that the regulator is serious about increasing governance and
transparency which are essential ingredients for the long term
viability of stock exchanges.
With market expectations of good corporate profit growth in
2007, the forecast price earnings ratio of around 10.5 for the
market as a whole continue to make this a very attractively
The Omani market witnessed moderate returns during the period.
The news that attracted most attention was Oman's decision to
not join the monetary union of the six member nations of the
Gulf Cooperation Council (GCC) as they view the 2010 deadline as
too ambitious. This development had no immediate impact on the
In corporate news, Bank Sohar announced the launch of an IPO of
40mn shares at a price of OR0.52 per share. The subscription
period is from December 09, 2006 to January 07, 2007.
Valuations in the Omani market are no longer as attractive
versus other G.C.C markets as they once were but given the
decent outlook for corporate profits and the Omani economy in
general, we remain positive on this market.
The Qatari market, after more than 4 months of negative returns,
changed course and ended with a powerful late month rally that
totally erased the large November losses. Trading volumes
steadily improved towards the end of the month as investors
rushed to purchase cheap shares and stocks such as Industries
Qatar and Qatar National Bank were around 15% higher while Qatar
Islamic Bank posted a huge 30% increase.
After the large losses of the past 4 months, valuations in the
Qatari market have approached much more reasonable levels and
regional investors are expected to give this market more
attention in the medium term as economic and corporate profit
growth in Qatar continues and the stock market develops more
The Jordanian market, despite a steep decline in the middle of
the month, was able to recover substantially in the last two
trading days of the month and ended up only slightly lower for
the period. Trading volumes continue to be low amid a lack of
clear direction in the market. Economic news continues to be
positive with workers remittances and inward investments
supporting the balance of payments and official reserves but the
market is lacking direction and it remains to be seen whether
4th quarter profit releases will have a positive impact on this