The Middle East is crammed with rich, fast-growing economies. What it’s not chock-full of are foreign investors in its stock markets. Global portfolio managers generally treat the region with a shrug and occasionally with more frustrated gestures.
Statistics are hard to come by, but certain factors almost guarantee that foreign investment will be lower in Gulf Cooperation Council (GCC) and other stock markets in the region than in markets elsewhere. Many markets have short histories, some having opened in just the last decade, and governments often limit foreign shareholdings.
It’s not that Middle East markets are out of bounds to, or universally shunned by, foreign investors, or that those who choose not to deploy capital there are making the right call.
Some portfolio managers and other professionals have significant positions in the region – in part because they believe that their peers’ absence has left stocks trading at bargain prices. But the lack of a large, stable, diverse base of investors often means that foreigners make fleeting forays into the markets, using them for quick scores only.
Even if access were easier, it’s doubtful that foreign investors would be clamouring for it. Those who steer clear of the region or have minimal holdings there say they consider the Middle East, as far as stock markets are concerned, too small to bother with.
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