Mideast stocks still a better long-term bet

London/Dubai: Investors who picked Middle East stocks as an insurance policy say high oil prices still make the region a better long-term bet than many emerging markets, despite suffering a reality check last week.

For all the talk of their ability to withstand global financial market weakness, stocks across the Middle East tumbled last week in line with other emerging assets, recalling the 2006 crash that wiped billions of dollars off their value.

Yet looking beyond the falls, it is difficult to argue against the region's massive oil-backed surpluses, the likelihood of currency appreciation in the medium term and the countries' attempts to diversify their economies.

"The Gulf is fundamentally sheltered from this global storm, as long as oil prices remain high," said Philip Khoury, head of research at Egyptian investment bank EFG-Hermes.

Michael Hartnett, head of emerging equity strategy at Merrill Lynch, identifies the Middle East as the pick of the frontier markets among under-developed markets that are less liquid and less correlated with global markets but offer better returns.

The lower the correlation, the less a market tends to react to global swings, making it a good play during volatile times.