Muscat: The Gulf Cooperation Council (GCC) markets' performance was lacklustre, in stark contrast to the emerging markets, which surged in 2012 due to the large influx of liquidity, Global Investment House (Global) said in its latest report.
While the MSCI World and emerging market indices increased 13.2 per cent and 15.1 per cent, respectively, in 2012, the GCC region indices grew between 20 per cent (Dubai) and seven per cent (Bahrain) during the year.
Saudi Arabia, the largest market in the GCC, recorded an increase of six per cent in 2012. Political unrest in the Middle East continued for a second year and had an adverse impact on the markets in 2012, the report added.
It further stated that the Kuwaiti market touched a multi-year low in April 2012 due to the effect of the ongoing political turmoil. However, strong corporate earnings catalysed growth, and the index ended 2012 with a gain of 2.1 per cent as measured by Kuwait Price index. The Bahraini market was the weakest among GCC markets as it declined 6.8 per cent in 2012. Weak corporate profits and political unrest adversely impacted investor sentiment.
In 2012, Dubai market outperformed other GCC markets and surged 19.9 per cent followed by the Abu Dhabi market that rose 9.5 per cent. Investors returned to the Dubai and Abu Dhabi markets in 2012 following a recovery in property prices. Qatar, the only GCC market that gained in 2011, reported a 4.8 per cent decline in 2012.
The combined market capitalisation of the GCC markets increased 5.7 per cent year-on-year to $738.9 billion in 2012. Of this, Saudi Arabia accounted for 50.5 per cent followed by Qatari market at 17.1 per cent. The increase in the combined market capitalisation of the GCC markets in 2012 can primarily be ascribed to the Saudi market. Saudi Arabia contributed $34.6 billion to the incremental market capitalisation in 2012, and the UAE market contributed $9.4 billion. However, declines in the Kuwaiti and the Bahraini markets during 2012 collectively shaved off $6.5 billion from the GCC markets' combined capitalisation.
The GCC corporate earnings grew 6.9 per cent year-on-year in the nine months of 2012, and the region is set to report another year of earnings growth. Apart from Bahrain, all other GCC markets are expected to report earnings growth in 2012. However, the growth is expected to be significantly lower than that in 2011 (up 31.9 per cent), and earnings are expected to be lower than the consolidated GCC earnings in 2007. Corporate earnings grew 31.9 per cent year-on-year in 2011.
With the onset of the global financial turmoil, the region's corporate earnings plummeted 44.7 per cent year-on-year in 2008 and managed to post high-single-digit growth rates in 2009 and 2010.