Arab stock market cap hits $1tr

Abu Dhabi: The market capitalisation of Arab stock markets crossed the $1 trillion mark in June this year but three Gulf markets account for the lion's share, the latest figures from the Arab Monetary Fund (AMF) show.

Experts say the market value of Arab stock markets is still low compared to developed markets, although as a percentage of GDP it is higher, suggesting faster integration of the regional markets.

According to the AMF, which generates the AMF Composite Index of 15 Arab stock markets, the total market capitalisation of these exchanges touched $1.052 trillion in June 2006 compared to $1.289 trillion in December 2005.

But Saudi Arabia, Kuwait and the UAE represent some 80 per cent of the total market capitalisation, while the remaining 12 markets represent only 20 per cent, AMF data showed.

Comparison

"The combined $1 trillion market cap is still less than one big market elsewhere. There are markets in the Arab world that trade one day a week and markets that have only two or three companies listed," said Dr Ebrahim Akoum, Chief of Arab Financial Markets at AMF.

There were 1,647 companies listed on the 15 Arab markets. The Cairo and Alexandria markets topped the list with 706 companies but a market cap totalling a modest $65.50 billion. Amman's market value with 209 companies totalled $31.83 billion. Kuwait with 161 companies had a market cap of $105.86 billion.

However, Saudi Arabia's market cap was the highest totalling $525.0 billion from 79 listed companies. The UAE, with 92 listed companies had a market cap of $177.34 billion. The Algeria Stock Exchange, with a market cap of $91 million and three listed companies took the last spot. "Many stock markets in the region are new and evolving and steps are being taken to integrate them," said Dr Akoum.

"An integrated GCC or Arab stock market would give investors the ability to chase really good performing companies, attract foreign institutional investors and improve standards for market making and brokerages."

Opinion

But Ziad Al Abbas, Head of Domestic Capital Markets Group for National Bank of Abu Dhabi said the idea of a single GCC or Arab market should not be forced on Arab exchanges, rather decided voluntarily based on their objectives.

"Unless integration provides mutual benefits, it would not very useful. There should also be the political will. But this may not be the case since some stock exchanges are competing to be the leading bourses in the region," said Al Abbas.

"It might be worthwhile to start integration of a few markets, for example in the GCC and later other Arab stock exchanges can join."

Another regional stock analyst based in Dubai said integration may take time and linking up the exchanges electronically should be speeded up. "Such a thing is already happening but look at the UAE itself. There are two exchanges although both use the same trading, clearing and settlement systems. Despite talks of a merger, it is yet to happen."