The urgent need for reform in the region’s capital markets is clearly highlighted by the 2011 MEED ranking of the 100 largest publically traded companies.

The combined market capitalisation of the Middle East and North Africa’s leading listed firms, as calculated at the start of March, is $656.6bn. This is just 2 per cent higher than in 2010 and more than $200bn lower than in 2008.

Having being battered first by the global financial downturn, then by the fallout of the Dubai debt crisis, major defaults among Saudi conglomerates, and the bursting of the real-estate bubble, regional investors have become wary of parting with their cash.

With the civil uprisings now sweeping the Middle East and North Africa, valuations are likely to remain under pressure for the remainder of the year.

Steady long-term growth in the region’s capital markets can only come with investment from pension and mutual funds, and insurance firms. At present, the region’s stock exchanges are overly reliant on retail investors, who are fickle by nature and easily spooked by events. Institutional investors account for less than 30 per cent of market turnover in the GCC, whereas in the US they account for more than 70 per cent.

The possible reclassification of the UAE and Qatar bourses as emerging markets, from frontier markets, will assist in this, but it must to be accompanied by improved regulation and an easing of restrictions on foreign ownership. With so many stock exchanges competing for business in a small catchment area, greater openness and broader access will be needed if bourses are to return to the heights seen before the financial crisis.