The seven stock markets operating within the six-nation Gulf Cooperation Council (GCC) are noted for posting mixed performance, with bourses changing positions year after another.
As such, end-results for 2012 and the first two months of 2013 point out to some remarkable trends.
Of all GCC economies, only the UAE boasts two bourses, namely those of Abu Dhabi and Dubai, hence the fact of having seven rather than six regional stock markets. This phenomenon serves as testimony of the dynamic nature of the UAE economy.
On a positive side, the two UAE bourses demonstrated capability of registering appealing results over the past 15 months or so. The index of Dubai Financial Market grew by 20 per cent in the entire 2012, second to none in the GCC region. Still, fellow Abu Dhabi Stock Exchange came second with a growth of 9.5 per cent. Accordingly, UAE bourses were the unchallenged regional leaders in 2012 with regards to growth of the index.
For its part, the Saudi Stock Exchange, better known as Tadawul, grew by a notable 6 per cent throughout 2012. This is an amazing result for a bourse regarded as the barometer of all GCC stock markets by virtue of accounting for more than half of market capitalisation of the seven exchanges. Of all GCC bouses, Tadawul remains the most active in trading thanks to Saudi investors.
However, the rest of bourses grew either rather slightly or negatively, like 2 per cent and 1 per cent in the cases of Kuwait and Muscat, respectively.
Still, Bahrain’s bourse dropped by 7 per cent in 2012, the worst performer amongst the GCC stock markets.
Certainly, the not so impressive performance of Bahrain Stock Exchange was not surprising amidst on-going socio-political unrest shaking the country ever since February 2011. Yet, prospects for an improved political landscape received a surprising boost in the recent weeks.
In February, the authorities started a national dialogue in the hope of finding an exit formula of the crisis. Change of atmosphere, albeit limited, is demonstrated in realising growth rates of 0.4 per cent of the index in February. Also, market capitalisation grew by 0.6 per cent in February to reach $16.5 billion.
What is happening in the Qatari stock market provides evidence of changing trends in regional bourses. In fact, the Qatari bourse was the only GCC stock market that registered growth in its index in 2012. Conversely, the Qatari Exchange dropped by 5 per cent in the entire 2012 and another 2.2 per cent in February of this year.
Ostensibly, as a means of encouraging well-to-do nationals to invest in the local bourse, officials have recently uncovered a scheme that would grant prospective local investors the opportunity of owning stocks in blue-chip assets.
Qatar Holding, an investment arm of Qatar Investment Authority, intends to set up a new firm with a sizable capital of $12 billion, starting with half of the total. The design is partly meant to offset limited desire of Qataris for investing in the stock exchange when considering their income realities. Suffice to say that per capita income in Qatar is second to none in the world, more than $100,000 per annum.
Statistics relating to the seven bourses do not fall in line with economic realities of GCC economies at large. Total market capitalisation at end-February amounted to $768 billion. For comparative purposes, the GDP of Saudi Arabia amounted to $727 billion in the same year.
It remains to be seen whether Qatar’s idea of setting up a special firm to proliferate international investing could serve as a model.