Analysts say 2011 could be lost year for Arab bourses

MENA bourses may not see recovery till 2012 as political turmoil sends investors fleeing
Analysts say 2011 could be lost year for Arab bourses
Analysts have said 2011 will be a lost year for stock exchanges in Middle East and North Africa
By Shane McGinley
Tue 08 Mar 2011 06:11 PM

Analysts have said 2011 will be a lost year for stock exchanges in Middle East and North Africa as widespread political turmoil drives away investors.

Bourses in the region have lost $140bn in market capitalisation during the last five weeks and recovery looks unlikely before 2012, said Youssef Saada, head of financial research at Zawya.

 “Confidence is something that comes with time. Investors do not come back on the spot; they wait a bit for a positive sequence… I do not see this happening in 2011 at all,” he said.

His views were echoed by Nicholas Wright, head of institutional brokerage at Mubasher Financial Services, which has offices in Manama and Dubai.

“I would unfortunately agree with that,” he told Arabian Business. “We started in January cautiously bullish about this region... I think the region was on the cusp and we were cautiously optimistic, but this event has happened and we don’t know where it will end up. While there is uncertainty it is not good for regional equity markets,” he said.

The market capitalisation of sixteen Arab bourses was valued at $862bn on March 4, compared with $1.002bn on January 25, a day prior to the political crisis in Egypt, the Arab Monetary Fund said Sunday.

The losses in just over a month are far more than nine percent markets gained in 2010.

Even before the crisis, trading volumes were sluggish. Arab markets saw just 27 IPOs in 2010, raising $2.75bn, down from 17 issues raising $1.98bn the previous year.

Though no bourse has been immune to the regional sell-off, some analysts suggest the slump presents a buying opportunity for investors.

“For those foreign investors that stay out when prices are low, [2011] will be a year of lost opportunity,” said Peter Gotke, the Dubai-based vice president of Bank of New York Mellon. “Qatar continues to grow at double digit rates. The UAE is forecast to show robust statistics, and has any number of great companies that would suit a dual listing on other exchanges.

“Of course I am talking more about the GCC than North Africa, and the situation remains fluid, but we do expect new issuances to come to market in 2011 from several markets,” he added.

Asher Noor, chief financial officer at Saudi-based family-owned firm Al-Touq, said investors were displaying a knee-jerk reaction to regional turmoil that would be short-lived.

 “This is not going to be a sustained situation so a recovery will be on the cards in no time at all,” he told Arabian Business. “The fundamentals of companies operating in this region are by and large in good health.”

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