UBS expects Middle East stock markets to outperform this year

Dubai: Middle Eastern stock markets will "outperform" this year as the region's economies benefit from high oil prices and a recent correction has made stocks "reasonably attractive", UBS AG wrote in a note to clients.

Equities in the UAE, Egypt and other regional markets will "continue to offer one of the more attractive opportunities to foreign investors in 2008," helped by "attractive valuations," economic growth fuelled by high oil prices, and a "low" correlation with global markets, London-based strategist Oussama Himani wrote.

Members of Dubai's index trade at an average of 17 times estimated earnings, according to data compiled by Bloomberg. That compares with a multiple of 34.6 for China's CSI 300 Index and 21.4 for India's Sensitive Index.

Insulation

UBS, Europe's largest bank by assets, expects Middle Eastern economies to be "largely insulated from slower growth in the US and Europe" with sustained economic expansion "not least because of high oil prices," Himani wrote.

Crude traded in New York averaged $72.36 per barrel in 2007, 20 per cent higher than the previous year, according to Bloom-berg data. The Gulf states, which together pump a fifth of the world's oil, are earning more than $1.3 billion a day with crude above $90 a barrel.

The Gulf Cooperation Council states of UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain will expand at a faster rate in 2008 than last year, EFG-Hermes Holding SAE wrote in a report on January 7.

The UAE's economy will grow 7.2 per cent, while the Saudi Arabian economy will expand 4.9 per cent in 2008, according to the median estimate of seven economists polled by Bloomberg in December. That compares with US economic growth of 1.9 per cent this year, according to a Bloomberg survey.

Markets in the UAE and Egypt are the most attractive, with opportunities especially in financial, insurance and materials companies, according to the note.