Buy Gulf stocks now, bank says

by This email address is being protected from spam bots, you need Javascript enabled to view it on Wednesday, 17 October 2007

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Gulf Arab stocks especially property and energy stocks offer strong growth prospects at current levels, the National Bank of Abu Dhabi said, urging investors to cash in on opportunities in regional markets.

"Now is the ideal time to buy UAE and Gulf stocks. It has been proven across many markets that when there's doom and gloom, it is usually the best time to buy on a selective basis," Nazem Al Kudsi, chief investment officer of NBAD's Asset Management Group, said in a statement to Reuters.

"We viewed stock price weakness in the UAE and (the Gulf) related to the bad mortgage loans in the US and the contagion to other banks and companies globally as an opportunity."

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NBAD, the UAE's largest asset manager, is bullish on Gulf stocks due to sound economic fundamentals, ample liquidity and improved investor sentiment.

"Valuations are much more reasonable after the market declines in 2006," said Derek Hong, senior fund manager at the Asset Management Group.

Hong said that at the beginning of 2006, after two strong years on the market, valuations were 40 times forecast annual earnings. "Now after 40 to 60% declines in stocks in 2006, we are trading at 70% cheaper valuations. None of this has changed over the past few weeks," he added.

NBAD forecasts 8 to 10% regional GDP growth with corporate profit growth in the mid to high teens. "Coupled with forward multiples in the 12 to 13 times range, we think it is interesting that you can potentially achieve near-China growth at roughly a third of the cost," Hong said.

Inflation is an issue in some of the Gulf states, especially the UAE, due to price rises in the real estate sector as well as on food and other items.

"Real estate stocks are a good buy for retail investors and so are cement companies stocks," Hong told Reuters by telephone. "We are also bullish for energy stocks.

"Stock markets are a money game and there is lots of money around and the price of money (interest rates) is low, so there is high liquidity. The fundamentals of the UAE and other economies in the Gulf are strong and investor sentiment, although still somewhat damaged, is improving," he said.