In an article earlier this year, I mentioned that the GCC’s stock markets had failed to match up with the gains made by European, Asian and North American bourses, and which saw the FTSE surpass 6,500 points and the Dow break the 15,000-point level.

But it did not take long before the GCC stock markets to achieve uplifts alongside those of the global markets, particularly after Dubai Financial Market, Abu Dhabi Securities Exchange and Qatar Exchange (formerly the Doha Securities Market) were upgraded to “emerging market” status after several years of efforts by exchange officials in both countries to win the confidence of global investors.

During Ramadan, DFM rose 14 per cent, while the Abu Dhabi Securities Exchange gained 7 per cent, and the rest of the GCC markets managed to resume levels seen before the financial crisis in September 2008.

These occurred despite continued instability in the Middle East, thus reflecting investor confidence, including foreign investors’, in the Gulf’s stock markets. The sentiment was buoyed by stability in their economic and security conditions, a fact that qualifies them to attract more domestic and foreign capital.

Investment conditions

With Abu Dhabi, Dubai and Doha bourses joining the emerging markets, this creates new investment conditions, offering great potential to develop their capabilities and the capacity of companies listed on these markets to achieve higher performance levels. At the same time, this will motivate the remaining GCC markets to adjust their status and situations to meet emerging market requirements and reach a certain harmony whereby the GCC countries together serve as a common investment-ready market.

For both UAE and Doha markets, the upgrade is expected to be completed in the next few months. Maintaining the status requires them to overcome several challenges related to updating regulations pertaining to listing, disclosure and transparency, which will make them gain more customer confidence and allow them to prepare themselves to join advanced markets.

All GCC markets still need market makers that play a big role in creating the stability and evolution of markets naturally, as well as in curbing random speculation, which shakes confidence and drives away investments, including institutional, which in turn is a key to stability.

Legislative structure

It seems that the three upgraded markets along with the rest of the GCC markets have the capacity to develop their legislative structure, which would enable them to achieve further gains. More so, as the equity markets look to continue with their recent rise. This is supported by the fact that listed companies, especially banks and real estate companies, achieved results that exceeded expectations in the second quarter. This is expected to continue right through the third and fourth quarters.

This phase will include corrections from time to time, which is mandatory to rein in speculations and strengthen institutional investments. The performance of listed companies and the general economic conditions signify the progressive direction taken by the GCC markets.

IPO activity

In addition, IPO activity will resume again, especially in the UAE, Saudi Arabia and Qatar. This will help GCC markets see further recovery after a period of stagnation.

Despite the possibility of higher interest rates, which may affect investor decisions, there are no signs so far of volatility for the major currencies, including for the dollar to which most GCC currencies are pegged. The outlook for growth within the GCC stock markets looks highly favourable.

Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.