- Sustained economic growth expected in GCC economies backed by high oil prices and government spending on infrastructure
- Saudi Arabia GDP growth for 2011 upgraded while Egypt and Yemen has been downgraded by IMF
- MENA equity valuations remain attractive at 10x 2011 P/E ratio
Equity markets in the Middle East and North Africa (MENA) region present a sizeable opportunity for investors focusing on the emerging market economies, according to Emirates NBD Asset Management (AM), the wholly owned asset management arm of Emirates NBD, a leading bank in the Middle East.
Speaking at the recent International Adviser Hong Kong Expert Investor Forum 2011, Yong Wei Lee, Head of MENA Equity Investments, Emirates NBD Asset Management, identified a range of investment opportunities in the MENA region, which has a combined GDP of US$3,150 billion. In the current economic environment, he favours consumer, petrochemical and financial stocks.
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, which will be funded by the current high oil prices, he said. The IMF has also recently upgraded the 2011 GDP growth expectation for Saudi Arabia, Kuwait and Qatar on the back of increased oil production and infrastructure spending plans. Countries such as Yemen and Egypt on the other hand, had their growth outlook for 2011 downgraded due to the current political turmoil.
““Rising oil prices and a return to political stability will be perceived by investors as positive catalysts for robust performance in MENA equities,” said Yong Wei Lee. “The region is home to 60 per cent of the world’s oil reserves and 40 per cent of global gas reserves.”
“The current MENA equity valuation at 10x 2011 price/earnings ratio is at an attractive level, which is at a discount to global emerging markets price/earnings of 11x,” he added.
Yong Wei Lee particularly emphasised the positive effect on MENA equities from the return to political and economic stability in the neighbouring GCC economies, adding that further improvement in regional political stability is likely to bode well for the stock markets.
He pointed out that 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.
The second annual Hong Kong Expert Investor Forum, which provides a networking and educational platform for professional intermediaries, financial advisers, wealth managers, investment specialists and tax & estate planners, was sponsored by Emirates NBD Asset Management.
