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MENA investment outlook upbeat

Last updated: Monday, February 04, 2013 12:49 AM

JEDDAH – Despite the critical ebb and flow in global financial markets these past three years, the Middle East and North Africa (MENA) region has managed to stem the tide and register a tangible GDP growth of 5.3 percent in 2012, Alternative Investment Strategy 2013 report released Sunday through Al Masah Capital Limited, said.

Bearing in mind the eurozone debt crisis, the easing of economic activity in China and a slew of fiscal downturns hitting the US, this is a hugely positive sign.

In 2013, the rate is expected to be even more impressive with many of the MENA countries allocating huge sums for public expenditure as compared to 2012.

Saudi Arabia, Qatar, Kuwait and Oman formed the spearhead of the resurgence, although a leg up was given through the intervention by central banks with their bold and timely monetary policies. These were designed to give buoyancy to investor sentiment which did occur and that led to a rally in the equity markets.

MENA market performance last year was powered by a number of engines, prominent among them major moves in the telecom sector, the revitalization of investment companies, the very cheerful opening of doors by real estate entities that had been gloomy for some time, greater attention to the agriculture, food and beverage sectors and a major commitment to upgrading the quantity and storage of building materials.

Market trends indicate that fund managers are taking a positive view on MENA equities. This stance has been galvanized by recent announcements signposting large-scale public expenditure in annual budgets by most GCC members. This collective enterprise is not only seen as a show of confidence but is backed by faster and more efficient government machinery.

Saudi Arabia, for instance, unveiled a record $219 billion budget for 2013, up almost 20 percent over the previous year. Dubai also announced an AED34 billion budget for 2013, up 8 percent over the previous year. Oman’s 2013 budget allocates $33.5 billion for expenditure, up 30 percent over the previous year.

These are not only credible figures but they underscore the fact that for the MENA region the crisis is fading and business is poised for another growth period.

Boosted by high energy prices, GCC governments are continuing to accumulate surpluses and follow their expansionary plans in the physical and human infrastructure, fuelling growth at a rapid pace. This is poised to translate into a rise in corporate earnings.

Over the next 12-month period, Al Masah Capital Founder and CEO, Shailesh Dash believes certain sectors will perform at a high level an d generate even more fiscal steam. “The sectors best suited for this double digit growth are banking, chemicals, utilities and Holding companies (diversified) since they are trading close to valuations that we deem attractive,” he said.

The report said it was not only equities which benefitted. The MENA bonds market also performed well in 2012. GCC conventional bonds gained 14.1 percent, according to the HSBC/NASDAQ Dubai GCC Conventional US Dollar Bond Index, while GCC Shariah-compliant notes advanced 10.4 percent during the period. These trends also augur well for the coming year.

Analysts are unanimous over the rebounding of the real estate market. It is the prime indicator that things are looking up significantly. Al Masah states the real estate market in Qatar was relatively better placed than other GCC countries. The office and retail segments here, which suffered from oversupply in 2011, were seen recovering with good growth prospects. Within the residential sector, rents for mid-range properties were seen picking up in the mid year. In Saudi Arabia, approval of the long-awaited mortgage law in July 2012 was a key milestone and will now pay off.

Three real estate markets striking an upbeat note are the UAE (Dubai), Qatar (Doha) and Saudi Arabia (Riyadh). In Dubai there was an increasing demand for villas and this trend continues. The hospitality segment remained robust through the year in Dubai, with a rise in daily and occupancy rates.

The rise in home prices in prime locations of Dubai and government forecasts that the emirate is likely to expand at the fastest pace in five years, show a clear consensus that Dubai real estate market is ripe for investment. The recent announcement of Mohammed Bin Rashid City – a multi-billion dollar enterprise is already attracting global attention. — SG

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