A report prepared by KAMCO Research that analyzes the performance of the 7 GCC Equity Markets during June-2011 in addition to assessing the latest key economic and market developments and their effect on the performance of each stock market.
— Editor
GCC bourses have come under significant negative pressure during the month of June due to the continued political unrest in the Arab World as well as the announcement from the US Federal Reserve about expectation for slower world economic growth along with its implications on the global bourses. A weak global economy would lead to a retread in world demand for oil and petrochemical products which represents a key moving factor for the GCC markets. The negative performance and evident weakening liquidity reflects the absence of any new market catalysts and also indicates investors’ concerns over the semi-annual results of GCC corporates that preferred to book profits ahead of the earnings season. Equity markets in the GCC region retreated during 1H-11 following international markets which also slumped amid rising fears that Greece’s sovereign debt crisis will spread and slow the global economic recovery. During 1H-11, GCC Markets lost around USD 28.2 bn with the Kuwaiti bourse suffering the highest losses of USD 17.7 bn.
Developments surrounding the MSCI upgrade for Qatar and UAE equity markets represented another negative factor suppressing the performance of the stock exchanges as the Index provider extended the review period for the potential reclassification to “Emerging Markets” status to December of this year in order to give additional time for market participants to assess recent enhancements on both exchange platforms. The Index Company currently categorizes both countries as “Frontier Markets”. An upgrade could attract new liquidity to regional bourses and drive up foreign direct investments (FDI), which has declined in the past couple of years. The GCC region has been plagued with weak trading due to the absence of any fundamental catalysts and the persistence of negative market sentiment that are keeping major investors on the sidelines waiting for the dust to settle.
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