Time is right for institutional investors to evaluate GCC

Abu Dhabi, 3 March 2007: Improving regulation, a strong economic outlook, more diversified investment opportunities and improved corporate governance standards are just some of the reasons why the long-term outlook for GCC financial markets is strong said Rashed Al Baloushi, Acting Director General of Abu Dhabi Securities Market (ADSM).

Speaking at the 2nd GCC Capital Market Forum in Dubai, Mr Al Baloushi explained the reasons behind the recent GCC stock market performance and said that now was the time for institutional investors to evaluate the GCC markets.

"Although 2006 seemed a difficult year for the GCC markets they behaved no less predictably than other financial markets at various stages of their existence", he said.  "What is important is that we educate people about why this happened". 

"Our markets are relatively young and, by the end of 2005 were highly over-valued.  Our markets are also predominantly retail-focused which results in more volatility as there is less long-term investment.

"What is important however, is that the long-term fundamentals for a stable GCC financial marketplace are in place", he continued.  "This should appeal to institutional investors".

"Our regulatory frameworks are becoming stronger, we are introducing diversified investment tools and improving corporate governance is a priority for us all.  In the last year alone, as part of our international best practices programme, ADSM has written a corporate governance code for the UAE, recommended trust and custody laws which will help increase the number of collective investment schemes, recommended better IPO legislation, introduced the SMARTS surveillance system and reformed disclosure regulations.

"Together with this, the GCC markets are currently some of the best valued in the world.  At the end of 2006 Abu Dhabi had a p/e ratio of 10.1, Bahrain of 13.6 and Saudi Arabia of 16.2.  In comparison, the p/e ratio of the S&P 500 was 17.96, the Bombay Stock Exchange 100 was 24.37 and the Nikkei 225 was 38.72."

Mr Al Baloushi went on to explain how the positive economic outlook for the GCC region was also an important factor behind why institutional investors should look as the region as an excellent long-term opportunity:

"GCC governments plan to invest over US$700 billion over the next three years in the oil & gas sector, infrastructure and real estate.  In addition to this, commentators predict that oil prices will remain high and the success of the diversification away from oil dependence means non-oil gross domestic product (GDP) is also expected to grow.

"There is also much political will behind increased co-operation between the GCC states", Mr Al Baloushi explained.  "Increased co-operation, especially a common market and the prospect of monetary union, will promote trade and investment and improve the prospects for sustainable long-term growth.

"The GCC is becoming one, single, strong market", Mr Al Baloushi concluded.  "Never has there been a better time to invest in it." 

Since the end of 2001 the number of listed companies traded on ADSM has grown fourfold; there are now nearly six times as many brokerage firms; the aggregate market capitalisation of companies traded on the exchange is 20 times higher; there are 50 times as many shareholders registered and ADSM is a model emiratisation employer with UAE nationals making up about 74% of staff. 

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© Press Release 2007