It is likely to be a while before stock market activity in the Middle East picks up once again. Regional stocks have taken a harsh beating from the recent civil unrest and political uncertainties have pushed investors away as they adopt a “wait and see” approach.
The Middle East is now competing with the likes of Latin America for investment and is currently losing.
This year may see the lowest number of deals in the region since 2006, including private equity, venture investments and merger and acquisition activity. In the course of the year there have only been 349 such transactions. Compared with last year’s 937 deals, it is a drastic decrease. Even during the global financial crisis that hit the region hard in 2009, there were more than 600 transactions.
The unrest alone is not to blame. Financial uncertainty in Europe and America has negatively affected the region’s capital markets. Global transactions have also declined over the past year, but this should not be an excuse as the Middle East attempts to rebuild itself. Countries like Egypt, Tunisia and Libya are undergoing a critical phase in their history and need to invest to rebuild their societies.
The deal volume has been driven down by a lack of private equity investment in the region. The GCC countries can play a crucial role in supporting these countries as they enter a new era. With their vast oil wealth, GCC investment vehicles are best placed to drive up the number of private equity and venture investments to help stimulate the private sector and drive future growth.