According to Alkhabeer Capital, the combined GDP (gross domestic product) of the GCC region is expected to register a growth in excess of 4 percent where Qatar will top the list with (7 percent) followed by Saudi Arabia (4.6 percent), Kuwait (3 percent), Oman (2.7 percent), the UAE (2.4 percent) and Bahrain (1.2 percent).
At the same time, regional inflation is also expected to ease as commodities and global growth flattens during 2012.
Alkhabeer Capital believes that Saudi Arabia will emerge as the leading frontier economy with a lower debt profile, higher investment and rising infrastructure spending.
Saudi Arabia's growth is mainly derived from an expected jump in budgetary development spending (up 16 percent) as an outcome of $133 billion economic stimulus package announced by the government. Al-Khabeer's forecast for Arabian crude for 2012 has taken into account a 5 percent decline in prices along with a 2 percent appreciation for the dollar.
While an investor in a frontier economy is concerned primarily with currency movement and inflation, Saudi Arabia is unique because its peg with the dollar means stable currency while monetary measures - money supply - is used to ease imported inflation. Based upon Alkhabeer Capital's oil price outlook and past Saudi central bank (Saudi Arabian Monetary Agency) measures, it can be concluded that 2012 inflation is unlikely to exceed 4 percent.
Saudi equities are also expected to project good returns with modest risk. Trading at a PE of 11.5 and yielding 3 percent dividend, Saudi equities are the best pick among frontier world with a price appreciation potential of 17 percent.
Global growth
Europe is expected to shrink by 0.6 percent, the United States is unlikely to post higher than 1.5 percent growth and the Emerging world likely to post 5.1 percent growth; the global economic growth is expected to close around 2.5 percent for the year 2012, wherein China may contribute more than 40 percent of total global economic growth.
Year of bargain hunting
After reviewing all the asset classes and taking into account economic growth estimates, Alkhabeer Capital concludes that bargain hunting in equities is likely to generate the most optimum return depending on the investors' appetite for risk.
UK equities
Trading at a PE of 10.5 and yielding 3 percent dividend, UK equities are likely to be the best pick among the developed world, with a price appreciation potential of up to 30 percent.
Russian equities
Trading at a PE of 9.5 and yielding 2 percent dividend, Russian equities are expected to be the best pick among emerging world, with a price appreciation potential of 32 percent.
Saudi equities
Trading at a PE of 11.5 and yielding 3 percent dividend, Saudi equities are the best pick among frontier world, with a price appreciation potential of 17 percent.
Based on our global growth expectations, we believe that sectors, which are domestically focused such as cement, food and retail, are likely to be outperformers this year.
Wider GCC equities
Alkhabeer Capital recommends high dividend Kuwaiti stocks, selected equities in Omani hospitality and logistics sector, and Qatari equities.
Commodities
Slower growth in consumption, higher growth in supply and lesser depreciation in the value of currencies suggest medium to long-term outlook for commodities at flat to negative.
Oil Prices
Based upon additional supplies, a modest appreciation in the US dollar and a slowdown in global consumption growth, Alkhabeer Capital expects oil prices to shrink by 5 percent in 2012.
Ammar Shata, executive director and CEO of Alkhabeer Capital, commented: "I am delighted to announce our 2012 Economic Outlook written by our in-house research team, which identifies a range of investment opportunities both regionally and globally where investors can still secure a return on their investments.”
