Strong corporate earnings and prospects for further economic growth led to nearly all regional stock markets ending the year in the green. Apart from Iraq, which dropped 9 per cent year-on-year as its economy struggled amid security problems, all exchanges in the region rose at least 15 per cent.
Reflecting the returned confidence in the UAE economy, Abu Dhabi Securities Exchange rose 50 per cent, while Dubai Financial Market rose more than 80 per cent compared with December 2012. This has led to most companies now trading at fair value rather than being undervalued.
Other GCC stock markets also registered solid growth of up to 35 per cent, as investors anticipated Qatar-listed companies earnings going up as a result of increased infrastructure spending, while Saudi Arabia-listed firms benefited from the strengthening of its economy. A recovery in petrochemicals prices is also leading to positive sentiment over next years sector earnings. Even Egypts market has stabilised, although possible jitters ahead of elections will be a key challenge throughout the coming year.
Across the region, the prospect of attracting higher foreign investment adds to the positive sentiment. That comes on the back of index compiler MSCIs upgrade of Qatar and the UAE as well as hints by Saudi Arabia that it will look to open up its stock market to foreigners.
Hopefully these factors combined will help further deepen the regions markets.