September and August were highly volatile months for Mena markets due to concerns over the Syria conflict and a possible widening of the conflict to a regional level. As it became apparent that a military strike on Syria could be avoided and a diplomatic solution was more likely, markets recovered much of the earlier losses.

During September, Dubai put in the best regional market performance of 10 per cent followed by Egypt 7 per cent, Abu Dhabi and Saudi Arabia with 3 per cent each, while Qatar witnessed no change and Oman was the only market in negative at — 1 per cent.

Small cap stocks in Dubai such as Union Properties (+56 per cent m-o-m) and Deyaar development (+41 per cent m-o-m) rose significantly on the back of new property launches. A notable event during the month was Dubai Land Department’s decision to increase property transfer fees to 4 per cent from 2 per cent in an attempt to curb property speculation.

In Abu Dhabi, Aldar was up by 8 per cent m-o-m and in Saudi Arabia Dar Al Arkan rebounded aggressively by 7.5 per cent. On the construction side, Arabtec took centrestage announcing a new joint venture company called Arabtec-Samsung Engineering which will focus on oil and gas, power and related infrastructure sectors in the region.

In Qatar, shares of Barwa Real Estate remained flat in September despite the management’s plan to sell $7 billion worth of assets to its largest shareholder Qatari Diar. In Egypt, the real estate sector remained volatile due to ongoing political issues in the country.

Binding offer

In the telecom sector, Etisalat announced to the market that the validity of the binding offer and the exclusivity period granted by Vivendi for the acquisition of Vivendi’s 53 per cent stake in Maroc Telecom has been extended until October 31. In Saudi Arabia, shares of STC increased by 9 per cent m-o-m as XL Axiata announced that it will acquire 100 per cent of Axis Indonesia, an 84 per cent owned subsidiary of STC.

Growth in Saudi Arabia’s public sector has been quite strong with loans increasing by 20.5 per cent year-to-date. The aggregate monthly profitability of the Saudi banking sector increased by 13 per cent from the 2012 average and second quarter numbers reported by Saudi banks were strong.

During September, Riyad Bank was the best performing banking stock with the share price increasing 4 per cent, followed by Samba which was up 2 per cent. Arab National Bank’s share price declined 6 per cent and Saudi British Bank’s by 2 per cent.

In Qatar, we believe that over the next three months we should see public sector loan growth picking up sharply. Year-to-date the private sector has provided a positive surprise with loan growth at 21.2 per cent.

In the UAE, loan growth is expected to remain in mid-single digit during 2013. Most banks reported better than expected Q2 numbers with profitability being driven by growth in fee income.

In the Kuwaiti market, credit growth remains slow and the central bank has continued to ask banks to build additional general reserves, which has held back earnings growth from recording stronger numbers. The prospects of an economic recovery and sentiment on the credit growth story and the quality of bank assets are yet to improve. Kuwait’s economy is expected to start making progress if the political situation remains under control and much needed spending actually starts taking place.

Egypt’s equity index gained 6.7 per cent during September lifting its year-to-date performance into positive territory of 2.9 per cent. The Egyptian pound strengthened further gaining 1.4 per cent during the month owing to a constant flow of GCC financial aid.

The current roadmap is for the constitution to be finalised and approved via a referendum. The Egyptian Central Bank has yet again reduced benchmark rates which helped lift listed securities higher. Commercial International Bank performed strongly during the period gaining 7.2 per cent while EFG Hermes stock increased 9.5 per cent.

Average value traded on the DFM exchange surged to $268 million a day in September, up 25 per cent month-on-month and is almost six times the trading value achieved same time last year. This heightened trading activity is not only unusual for the usually slow summer months but is the highest monthly average in at least the four years.

Sentiment on Dubai has improved significantly and the city is a candidate to host the 2020 World Expo with votes scheduled to take place before 2013 year-end. Listed Dubai Financial market stock closed the month 13.9 per cent up and is expected to perform even stronger on the back of merger talks with Abu Dhabi’s exchange.

— The writer is the head of equities at NBAD Asset Management.