A Bank of New York-Mellon official has said more than $2bn foreign funds inflow could be expected into Qatar and the UAE should the regional bourses be upgraded
Ahead of a possible upgrade by MSCI of Qatar and the UAE markets, a regional asset management firm has said equity markets in the Middle East and North Africa (Mena) offers a “sizeable” opportunity for investors focusing on the emerging market economies.
The GCC economies are expected to witness sustained economic growth in the near and long term as a result of increased government spending on infrastructure, driven high oil prices, according to Yong Wei Lee, head of Mena equity investments at Emirates NBD Asset Management.
Identifying a range of investment opportunities in the Mena region, which has a combined gross domestic product (GDP) of $3.15tn, Lee said in the current economic environment, he favours consumer, petrochemical and financial stocks.
The International Monetary Fund has recently upgraded the 2011 GDP growth expectation for Saudi Arabia, Kuwait and Qatar on the back of increased oil production and infrastructure spending plans.
“Rising oil prices and a return to political stability will be perceived by investors as positive catalysts for robust performance in Mena equities,” Lee said, adding the region is home to 60% of the world’s oil reserves and 40% of global gas reserves.
Amid hopes that the MSCI Index may upgrade Qatar and the UAE to “emerging” market status from their present “frontier” status, a Bank of New York-Mellon official had earlier said more than $2bn foreign funds inflow could be expected into Qatar and the UAE should the regional bourses be upgraded.
The current Mena equity valuation at a multiple of 10 of 2011 price/earnings ratio is at an “attractive” level, which is at a discount to global emerging markets price/earnings of multiple of 11, Lee said.
He emphasised the positive effect on Mena equities from the return to political and economic stability in the neighbouring GCC economies, adding further improvement in regional political stability is likely to bode well for the stock markets.
There is usually a good correlation between regional equity market performance and oil price movements, although the markets have continued to lag the strong performance in oil price movements, due to continuing unrest in some countries, he said.