UAE, Saudi Lead Arab Bourse Recovery in 2012

Arab stocks investors ended 2012 richer by nearly $60 billion with the recovery of most regional bourses and those of the UAE and Saudi Arabia accounted for more than 80 per cent of the increase. Official data showed the combined market capitalization of the Arab world's 14 official stock exchanges surged to nearly $944.2 billion towards the end of 2012 from about $884 billion at the end of 2011, an increase of $60.2 billion. Most bourses recorded an increase but the UAE and Saudi Arabia emerged as the star performers through 2012, with their combined market capitalization swelling by nearly $49 billion, according to the figures by the Abu Dhabi-based Arab Monetary Fund.

Saudi Arabia's bourse Tadawul alone soared by $37 billion while Abu Dhabi Security Exchange grew by nearly $12 billion. Dubai's market capitalization rose slightly to around $49.8 billion from $49.5 billion. Qatar's bourse, one of the largest markets in the Middle East, increased to $132.2 billion from $128.4 billion while Kuwait's bourse, another major stock market, rose to nearly $103.9 billion from $100.9 billion in the same period.

Oman's Muscat securities market also performed well through 2012, with its market capitalization rising to nearly $22.2 billion from $19.6 billion. Bahrain was the only Gulf market to record negative growth, receding to $15 billion from $16.5 billion. Outside the GCC, Egypt's bourse emerged as the best performer with its market capitalization soaring to $60.2 billion towards the end of 2012 from $48.6 billion at the end of 2011, said the AMF, a key Arab League financial organization.

Morocco's Casablanca bourse, the second largest market outside the Gulf, shrank to around $52.9 billion from $60 billion. Jordan's Amman bourse also edged down to around $26.1 billion from $26.9 billion in the same period. All other bourses in the region recorded an increase except Damascus market, which continued its downward trend to reach one of its lowest levels of around $1.04 billion compared with $1.5 billion at the end of 2011 because of the ongoing conflict. The rise in most Arab markets followed a sharp decline in 2011, when the collective market capitalization of regional bourses tumbled by around $107 billion to $884 billion at the end of 2011 from $991 billion at the end of 2010.

Analysts said the bad performance in 2011 coincided with a downturn in most global markets because of the financial crises in some industrial countries. Some Arab markets also plunged because of the internal political unrest. "There are several factors for the recovery of most regional bourses, mainly because of the recovery in global markets and the rise in world assets as you know regional bourses, mainly those in the Gulf , are directly affected by developments in the world markets," said Fadi Kiswani of the Sharjah-based Sharhan Investments and Securities.

"Other factors include an increase in foreign investment into the region, mainly the UAE, an improvement in the real estate market in the UAE and better performance by the listed companies .in Saudi Arabia, another reason is the rise in petrochemical prices as the shares of petrochemical firms there have a high share in the market." Analysts said expectations by investors for higher dividends in the UAE also boosted the local market, noting that shareholders netted relatively high dividends in 2011.

Indirect factors included the surge in oil prices, higher public spending and strong performance of the domestic economy in most regional states, they said. Official data showed the 128 listed companies in the UAE bourses benefited from such factors and performed better through 2012, with their combined net earnings swelling by around 11 per cent to Dh32.8 billion in the first nine months of the year compared with Dh28 billion in the first nine months of 2011.

Forecasts by the Abu Dhabi-based Al Fajr Securities company showed full year profits could surge by 25-30 per cent in 2013. "There are many factors that point to this growth, mainly the strong economic performance in the UAE, an improvement in the real estate sector and plans to set up major projects," the company said in a study last week. UAE banks, which had a difficult period in the wake of the 2008 global fiscal crisis, also continued their recovery and reported higher earnings in the first nine months of 2012. The balance sheets of 17 national banks listed on the bourse showed their net profits swelled to Dh17.97 billion in the first nine months of this year compared with Dh17.53 billion in the first nine months of 2011.

In Saudi Arabia, banks netted more than SR28 billion in the first 10 months of 2012 as lending continued to rebound and banks largely eased a provisioning drive triggered by a severe domestic debt default crisis three years ago. Saudi banks have the second largest asset base in the Arab region after UAE banks, with their combined assets standing at SR1.69 trillion (Dh1.67 trillion) at the end of October against about Dh1.76 trillion for UAE banks.

Saudi Arabia, the world's top oil exporter, has the largest and busiest bourse in the Arab world, accounting for nearly 40 per cent of the region's total market capitalization. Like other Arab markets, Tadawul suffered from slower performance, shrinking by around $15 billion to $338.7 billion at the end of 2011 from $353.4 billion at the end of 2010. It had jumped by nearly $25 billion through 2010.

Abu Dhabi was also a bad performer in 2011, slumping to $64.4 billion at the end of 2011 from about $71.2 billion. Dubai also declined in 2011, ending the year at $49.5 billion compared with $54.7 billion at the end of 2010. Kuwait lost around $five billion to reach $100.9 billion at the end of 2011 compared with $124.9 billion while Bahrain and Oman also reported a drop through 2011. Qatar was an exception in the region in 2011, with the market capitalization of the Doha bourse growing to $128.4 billion from $123.3 billion at the end of 2010.