Arab Stocks Lack Buy ‘Triggers,’ Morgan Stanley Says

Arab stocks lack near-term “triggers” to spur gains and Dubai’s debt restructuring may remain a drag on the market until the second half of 2010, according to Morgan Stanley.

Higher financing costs, potential credit-rating downgrades and a delayed recovery in earnings are “major overhangs” for Arab equities, Michael Wang, an emerging-market strategist in London at Morgan Stanley, wrote in a research note dated yesterday. Investors should wait until “later” in the first half of 2010 to add to holdings, he wrote.

“The immediate crisis in Dubai is over but further debt restructuring and elevated funding costs remain overhangs,” Wang wrote. “Earnings momentum continues to lag other emerging- market regions.”