JEDDAH: Despite skepticism by investors due to the current economic environment, their view on the future development of the stock indices in six months clearly indicates high expectations for most GCC (Gulf Cooperation Council) markets.
According to SHUAA Capital’s GCC Investor Sentiment Report, which was released yesterday, 64 percent of respondents anticipate a rise in Saudi stocks, 53.2 percent feel that Qatari stocks will surge, and 51.4 percent expect increases in Abu Dhabi stock prices. Nearly 38 percent of investment community also see a rise of the Dubai Financial Market (DFM), the majority indicates the stock prices will remain unchanged (27.9 percent) or fall (24.3 percent).
The assessment of regional stock markets reveals a very positive outlook. About 42.3 percent indicate that Saudi Arabia’s stock prices are undervalued. Over 33 percent see they are fairly valued and 12.6 percent think they are overvalued. Nearly 48 percent of the participants declare that Abu Dhabi stocks are undervalued, while 27 percent believe they are fairly valued and only 11.7 percent see them as overvalued. The view on DFM stocks is that 38.7 percent of investors believe that stocks are undervalued; 31.5 percent specify that they are fairly valued and 16.2 percent say they are overvalued.
Regarding the current stock prices in Qatar, 36 percent believe that stocks are undervalued; 28.8 percent consider stocks as fairly valued and 16.2 percent see them as overvalued.
Other GCC markets such as Oman (12.6 percent) and Bahrain (9 percent) also show signs of a major gap between the perceived company value and market prices. In Kuwait 3.6 percent of the balance of investors see stocks as undervalued, and Nasdaq Dubai 10.8 percent of investors characterize stocks as undervalued.
These results, particularly in the United Arab Emirates, Saudi Arabia and Qatar, point to a greater divide between current stock prices and company values than in developed markets where the balance of investors gauge the respective benchmarks Dow Jones 30 (16.2 percent), FTSE 100 (10.8 percent) and Eurostoxx 50 (10.8 percent) as undervalued.
Investors conveying their forecast for the future profitability for eight economic sectors on balance expect a fall in profitability for five out of eight sectors. Investors believe that pharmaceuticals (13.5 percent), telecoms media and technology (9 percent) and utilities are likely to turn in positive or unchanged performances.
The majority of the respondents forecast a gloomy outlook for real estate and construction with 48.5 percent expecting profitability to fall, 27 percent predicting no change, and only 12.6 percent expecting a rise.
For banks & financial institutions 45 percent predict a fall in profitability while 24.3 percent see no change and 26.1 percent forecast a rise in profits. Similar forecasts apply to consumer & retail (-14.4 percent), transportation & logistics (-6.3 percent) and heavy industries (-21.6 percent).
According to the survey which was conducted between April 1 and April 9, over the next six months, nearly 65 percent of all respondents see no further decline in the oil price, while 27.9 percent see the commodity’s price unchanged and only 5.4 percent believe it will fall.
The view on gold is fairly neutral with 28.8 percent predicting a fall; 29.7 percent expecting no change, and 37.8 percent expect it to rise in value.
The results of the survey also pinpoint a significant depreciation of major currencies over the course of the next six months. The depreciation expected for the US dollar, the British pound and the euro is significant at 49.5 percent, 37.8 percent and 36 percent respectively.
More than half the market participants prefer the GCC as a destination of capital to global emerging markets and prefer the GCC four times more than BRIC (Brazil, Russia, India, and China). Accordingly, 33.3 percent of investors have decided to invest in GCC countries within the next six months, while 18 percent are determined to invest in global emerging markets and only 8.1 percent have decided to invest in BRIC countries.
In line with the predominantly optimistic outlook for rising stock prices, combined with the majority of investors assessing individual markets as undervalued, it is not surprising that more than half of the respondents, 52.3 percent, have indicated that they are planning to invest in GCC markets within the next six months, 23.4 percent are undecided and 18.9 percent will not invest.
It appears that Saudi Arabia can get ready for significant inflows of capital as 58.6 percent of investors indicate that they will allocate funds to the Kingdom, 20.7 percent are undecided and a mere 12.6 percent will not invest within the next six months.
The same indicator predicts that 37.8 percent of respondents will invest in Qatar while 28.8 percent are undecided and 21.6 percent will not invest. A total of 38.7 percent are eyeing the United Arab Emirates while 18 percent are undecided and 23.4 percent will not invest. Kuwait (-32.4 percent), Bahrain (- 26.1 percent) and Oman (-9.9 percent) are not currently markets where investors plan to invest.
