JEDDAH, 15 March 2005 — Gulf Cooperation Council (GCC) markets continued their forward journey in February as all the regional exchanges ended the month in positive territory. Qatar led the pack of regional peers for the second consecutive month with a m-o-m gain of 29.6 percent. Saudi Arabia with a monthly gain of 10.5 percent took the second position. The rest of countries — United Arab Emirates, Bahrain, Kuwait and Oman — reported monthly gains of 9.5 percent, 7.82 percent, 2.29 percent and 1.72 percent respectively.
Qatari market is also leading in terms of YTD gain by registering a whopping gain of 45.13 percent. The other markets which made to double-digit YTD growth were UAE (14.51 percent), Bahrain (13.72 percent), Saudi Arabia (10.85 percent). The key factors which foster this rally in the regional exchanges are excess liquidity, positive macroeconomic outlook and strong corporate earnings for 2004, according to a report prepared by the Kuwait-based Global Investment House (GIH).
The rally in the region has not remained restricted to the secondary markets only but has also spread to the primary markets which are witnessing a deluge of liquidity which can be gauged from the strong investors interests in the initial public offerings (IPOs). The GCC region paved way for 2 more successful IPOs. The primary issue of Qatar Gas Transport Co. (Naqilat) was oversubscribed 9.5 times, mobilizing a whopping QR13.75 billion ($3.8 billion) from the public. The SR1.5 billion ($399.9 million) IPO of Bank Albilad of Saudi Arabia was oversubscribed within a day and a half of opening. According to the GIH report many more companies in the region are planning to go for IPOs which will further widen the depth of the regional capital markets this year.
All countries of the GCC region have been witness to some mega-projects that require private investments. Whether it’s the Bahrain Financial Harbor, Dubai’s real estate and tourism projects, Qatar’s LNG business, Kuwait’s North Oil development project and Failaka Island Development or Saudi Arabia’s restructured “Gas Initiative”, which are poised to offer excellent investment opportunities to the investors. In power sector alone, it is estimated that the GCC region will need to build 100 gigawatts of power generation capacity before 2020 which require investment of more than $150 billion.
During the year 2004, the Qatari stock market presented a third highest gain amongst the regional peers. Qatar’s Doha Stock Market (DSM) general index appreciated by 64.5 percent in 2004 to 6,493.62. The year 2005 is proving to be a highly bullish for the Qatari market as in just two months of 2005, it registered a massive gain of 45.1 percent.
The economy which is registering a strong growth over the last few years, had recorded another year of astonishing performance by registering a 20.5 percent growth in its GDP for the year 2004.
Apart from the booming economy and strong corporate fundamentals, the major driving force behind this rally was the opening up of the stock market for foreign investors. Qatar’s government has decided to partially open the stock market in the country for foreign investors. Non-Qataris would be allowed to own up to 25 percent of companies listed on the Doha Securities Market (DSM).
According to the law, expatriates and non-resident foreigners will be allowed to trade on DSM from April 3 this year. However, they will not be allowed to access the primary market. Apart from this, the country is also setting up an international financial center to attract not just international banks and those involved in financial services but also major multinational corporates so as to become a true business as well as a financial center.
The corporate earnings of the listed companies grew at a healthy rate of 48.4 percent for the 9-months ended September 2004.
The market capitalization of the GCC region continued to climb. Out of the six countries, the only country which registered a decline in its market capitalization was Oman. It has witnessed a marginal decline of 0.4 percent in its market capitalization in February to $8.2 billion.
Qatar registered the highest monthly gain of 45.4 percent in its market capitalization to $71.97 billion due to phenomenal rise in stock prices, which was followed by UAE (12.4 percent), Saudi Arabia (10.5 percent), Bahrain (8.8 percent) and Kuwait (2.4 percent). In February, the number of listed companies increased to 502 from 493 in January and to some extent this has also helped to propel the market capitalization of GCC stock exchanges, the GIH report said.
The market breadth of the Qatar stock market was highly positive with only 1 decliner out of the 30 stocks listed at DSM, indicating a extremely bullish sentiment in the market. Tadawul also witnessed a high advance-decline ratio with 69 advancers and only 5 decliners. The only market which witnessed negative market breadth was Kuwait where 62 decliners outpaced 52 advancers, however the market indices ended the month in the positive territory indicating buying in the select index stocks, the report said.