UAE stock mart posts lowest growth in GCC

The UAE bourse recorded the lowest growth in the GCC financial markets this year and experts blamed what they called the lack of investment awareness, preference of banks and restrictions on share dealing by foreigners.

While some bourses leapt by more than 66 per cent in the first five months of this year, the UAE stock market grew by only six per cent although listed companies have reported strong performance and the market is awash with liquidity.

"There are some factors that are contributing to this slow performance in the UAE market compared with the financial markets in neighbouring Gulf countries," said Ziad Dabbas, share dealing director at the state-controlled National Bank of Abu Dhabi.

"These factors include the weak investment awareness in the UAE as many investors are opting for banks although interest rates on deposits do not exceed 1.5 per cent while some share yield exceeds four per cent," said Dabbas in a report.

Dabbas also blamed what he called curbs on foreign investors which he said were smothering stock dealing in the UAE. He noted that foreigners were still confined to such expatriate firms as the telecommunications firms of Saudi Arabia, Qatar and Sudan but added there was a strong demand for their shares.

"Banks in the UAE have also failed to play the required role in stimulating the stock market as is the case in other GCC markets, where banks have become key players.

"The role of our banks in the local financial market is still limited compared with the banks in other GCC states, where they are largely activating dealing through the setting up of investment funds or offering financial facilities to investors to buy shares."

Dealers in Kuwait and Saudi Arabia, which have the biggest and busiest stock markets in the Middle East, said share dealing this year recorded high growth because of strong performance of listed companies, high oil prices, relatively high public spending and the end of the war in Iraq.

They noted the markets recorded their highest growth in May and were still busy despite the absence of many investors for the summer holidays.

"In Kuwait, the market hit one of its highest levels last month," said Jassim Al Saadoun, a Kuwaiti economist and stockbroker. "This is because of strong investors' confidence after the end of the war in Iraq, high oil prices and good corporate performance."

Dabbas' figures showed the Kuwaiti stock market was the star performer in the GCC this year, jumping by 66.6 per cent compared with 38.9 per cent through last year.

Saudi Arabia's bank-controlled exchange also soared by 33.8 per cent compared with only 3.6 per cent last year while Qatar's bourse surged by 37.2 per cent and Oman's market by around 26 per cent. Bahrain was relatively slow, recording a growth of 6.2 per cent.

"The UAE market grew by only six per cent this year compared with 14.5 per cent in 2002," said Dabbas.

"It was the slowest performance in the GCC despite strong performance by listed companies, improvement of the investment climate, high oil prices, an upturn in the economy and high domestic liquidity."

In terms of market capitalisation, the UAE bourses in Abu Dhabi and Dubai ranked third in the Arab world, with around $30.6 billion at the end of the first quarter of this year.

Saudi Arabia and Kuwait topped the list with a capitalisation of nearly $97.8 billion and $37.2 billion respectively, according to the Arab Monetary Fund.