High levels of growth in stock market activity in Morocco and other Arab markets could soon be replicated across the region, according to a report by the London-based Blakeney Management.
Morocco is still the only Arab stock exchange to offer unrestricted access for foreign investors, but this is set to change. Blakeney says: ‘By 1997 we think there will be 13 Arab markets which allow foreigners some access. This is the last great pool of undiscovered equities in the old free world.’
Those markets open to investors yielded impressive results in the first half of 1994. The index for the Tunis bourse grew by 41.2 per cent in January-June, the Casablanca Finance Group (CFG) index in Morocco increased by 34.6 per cent and that for Oman’s Muscat Securities Market by 16.9 per cent.
Investors should also look beyond existing exchanges, Blakeney says: ‘the most attractive opportunities may not yet be listed on the local bourses. The serious money will be made in private equity investments.’
Blakeney argues that by 1997 up to 13 Arab markets could be open to foreign investment including Saudi Arabia, Qatar, Syria and the UAE. This is despite the fact that Lebanon, the UAE, Syria, Qatar and the Palestine self-rule area do not even have formal stock markets for local investors.
Arab agencies are working to promote the creation and development of exchanges After five years of work, the Abu Dhabi-based Arab Monetary Fund (AMF) expects its computerised stocks database to come onstream this year, providing regional exchanges with economic data and information on stock markets, share prices and trading institutions. Oman, Bahrain, Kuwait, Jordan, Tunisia and Morocco have already signed up to join.
The AMF calculates that about 1,100 banks and companies trade their shares in the Arab region, with a capitalisation of nearly $50,000 million. Stock markets could attract part of the estimated $800,000 million in Arab funds held abroad, the AMF said in a report released in mid-July.
Oman has taken a lead among Gulf states. The $52 million Oryx Fund, managed by Blakeney, has begun operation and has an exclusive licence until early 1995 as the only vehicle for foreign participation allowed in the Muscat securities market (MSM). Launch of the fund has boosted MSM activity, with the market’s 100-point index rising to 134 points in the last week of July, its highest level since opening in 1989 (see Oman).
Another Oman fund, managed by Japanese banks, is expected to follow in early 1995.
Blakeney predicts that Bahrain and Kuwait will be the next two GCC markets to allow foreigners in. There are already four stocks in Bahrain open to all investors.
Potential in the Gulf could be huge, Blakeney’s chief executive Miles Morland says. Capitalisation of stocks traded in the UAE is more than $10,000 million making it ‘the biggest stock market in the world with no exchange,’ Blakeney says.
A formal market could be in place in UAE within the year, although it is still to be decided whether Abu Dhabi or Dubai will be the base. Studies are being undertaken by the Central Bank of the UAE.