Semi-annual Review…click here to download the full report
Of 2010, we said that it “simply lacked any triggers”... well, in that case 2011 seems set to be nothing but triggers (mostly negative). From natural disasters to ongoing financial ones (e.g. Greece, US debt, GCC corporate and sovereign debt) in addition to political turmoil; the first half of 2011 has not lacked in terms of headlines, highs or lows.
In our previous note we upgraded our outlook to a mostly Positive view on the region. This was due to many factors including; healthy economic growth, expected recovery in key sectors like Banking and Real Estate in addition to healthy valuations. We had adopted a Neutral stance on Dubai (due to persisting debt overhang and a struggling Real Estate sector), Bahrain (due to lesser corporate recovery), and Saudi Arabia (due to muted banking performance and investor sentiment).
We were wrong on all counts. The political turmoil which swept the region at the beginning of the year brought down all markets and proved a drag on earnings. Additionally, various corporate issues (in terms of M&A, debt restructuring etc) in addition to some regulatory and market developments (Kuwait CMA, MSCI not upgrading of UAE and Qatari markets etc) has dampened investor sentiment across the board.
Previous Recommendations & Market performance
For the rest of 2011, we have adopted a rather Neutral view of the markets due mainly to muted earnings growth and lackluster market liquidity and activity. We remain Positive on Abu Dhabi and Qatar due to positive economic growth and earnings potential.