The negative impact of the Arab uprisings on the region’s stock markets is wearing off, with first-quarter results showing a growing appetite for local equities.
The Egyptian Exchange (EGX) has made the strongest gains, ending the first quarter 38.54 per cent higher than the start of the year.
“The recovery Egypt has witnessed was one that was event driven,” says Radwa el-Swaify, head of research at Egyptian investment bank Beltone Financial. “There were a lot of merger and acquisition (M&A) announcements and a recovery from the massive sell offs of 2011.”
The rally was followed by the Saudi Stock Exchange (Tadawul), which gained 22.1 per cent in the first quarter, buoyed by higher oil prices and plans to open up the bourse to foreign investment. The Tadawul is expected to grow even further this year on the back of its spending plan and strong economic outlook.
Egypt, however, is unlikely to be able to maintain its strong growth without any triggers on the political and macroeconomic front, according to El-Swaify. Over the next few months, the presidential elections, writing of the constitution and signing of the International Monetary Fund (IMF) loan should act as key catalysts to boost the EGX if they go well without much trouble.
The Dubai Financial Market (DFM) was the third best performer, gaining 21.83 per cent. Like the EGX, the DFM has been recuperating its losses from 2011 following the effects of the Arab uprisings.
Abu Dhabi Securities Exchange (ADX) and the Kuwait Stock Exchange (KSE) both grew by a little over 6 per cent, followed by 3.78 per cent by Lebanon and 2 per cent gains by Tunisia and Palestine.
Perhaps most surprisingly of all, the Qatar Stock Exchange (QSE) only managed to advance 0.13 per cent, far lower than analyst expectations.
“Qatar is fundamentally strong. There are several stocks that are undervalued. The performance should pick up as we progress this year and as the infrastructure spending project awards pick up at the end of the year,” says El-Swaify.
Only three of the regional exchanges closed the first quarter with a loss. Morocco’s Casablanca Bourse lost the most with 1.08 per cent. The country is battling a shrinking economy and a disgruntled population waiting to see the political reforms promised to them.
Jordan and Oman also slipped. The latter has come more of a surprise. “The Muscat Securities Market (MSM) was not trading at expensive multiples and the macroeconomic outlook was also positive, but when you look deeply at the market, there are few stocks that investors can buy,” says El-Swaify.
Overall the results are positive and indicate an improved sentiment in the region. The only challenge is whether the region can maintain the growth and attract investors back to the market.