The Middle East and North Africa rank as some of the cheapest markets in the world but are still untouched by most international investors, according to the June quarterly report issued by the London-based Blakeney Management. The report, which also includes several sub-Saharan countries, forecasts strong growth for Egypt, Jordan and Oman until the end of the year, and is upbeat about the possibility of future investments in Bahrain.

According to price/earnings (PE) ratios calculated by Blakeney, the cheapest stocks are found in Oman and Egypt, with Bahrain and Jordan also offering good value. Tunisia has by far the highest valuation of any of the markets (see graph).

Bahrain is able to rival Oman in terms of valuations, now that the market has fallen by 33 per cent since its September 1993 high. The report suggests the third quarter will be a good entry point for investors. However, Egypt is expected to be one of the best performing markets this year. Many investors have liquidated stock to buy new issues, which has caused two out of three of the main indices to fall slightly during the first quarter. However, activity is booming and Egypt is expected to match the Moroccan market in 1995, with turnover of about $1,000 million.

Jordan has had a quiet first quarter with trading 56 per cent lower than the same period last year, but is still expected to perform well in 1995. Market valuations suggest shares are more expensive than Gulf markets, but the report says the figures are easily distorted, in such a small market, by earnings from a few dominant corporations.

Morocco continues to set an example to all markets in the region with its successful economic restructuring and privatisation programme, and the market is up by almost 7 per cent on the quarter. However, the best prospects are offered to the long-term investor, as further improvement in the stock market this year is less certain.

Oman is favoured for the improved profitability of its companies despite a stagnant economic environment. And profits for Omani firms are expected to grow a further 13 per cent in 1995, supported by the government's commitment to private sector-led development.