Saudi Arabia, Kuwait and Qatar offer best value on stocks

12 February 2014

GCC industrial sector shows largest upside potential, say analysts

Saudi Arabia, Kuwait and Qatar currently offer the best value on their stocks, Arjuna Mahendran, chief investment officer of the UAE’s Emirates NBD Wealth Management, said in a note on 12 February.

“Although we continue to like regional equities, we currently see more value in Saudi Arabia, Kuwait and Qatar, which are trading at an average discount of more than 20 per cent to the UAE market,” he said.

His comments followed the rapid growth of the UAE’s stock markets in 2014. Dubai surged more than 20 per cent, followed by Abu Dhabi’s rise of 13.5 per cent.

According to analysts’ consensus estimates, the industrial sector in the GCC, which currently has a price-to-earnings ratio of 11.7 times after the sector’s profit grew 44 per cent this year, has the largest upside. The construction sector – trading at 20.7 times price-to-earnings following profit growth of 13.9 per cent in 2014 to date – has the biggest downside potential.

“The GCC stock and bond markets remain a safe haven for investors, underpinned by solid fundamentals,” said Mahendran. “The Expo 2020, [US index compiler] MSCI’s inclusion of the UAE and Qatari markets in the emerging market category, infrastructure spending across countries, and the revival of trade, tourism and real estate are further fuelling momentum in the GCC macro trends.”

The markets could also receive a boost when more local companies list on regional exchanges, as UAE and Saudi companies are set to drive higher initial public offering (IPO) activity in 2014.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.