Markets bounce back from grim year

Stock markets in the Middle East and North Africa, which suffered losses last year totalling nearly $50bn, clawed back $44.5bn of their value in the first quarter of this year as stability in the region and around the world improved.

The Abu Dhabi Securities Exchange General Index covered more than half its $9bn losses by gaining $5.6bn. Christopher Pike / The National

Stock markets in the Middle East and North Africa, which suffered losses last year totalling nearly US$50 billion (Dh183.66bn), clawed back $44.7bn of their value in the first quarter of this year amid improving regional and global stability.

Many regional markets went into free fall last year as frightened investors took $47.5bn off the table amid sovereign-debt crises in Europe, recovery fears in the United States and explosions of violence and political upheaval across the Arab world. This year, action to contain debt in the European Union, positive signs from the US and improved political stability in the Middle East have encouraged investors back into equities.

Most stock exchanges in countries where money flowed out are still operating below levels of market capitalisation reached by the end of 2010.

The region's rebound is also heavily boosted by flows into the Saudi Tadawul All-Share Index, which pared last year's $2.9bn loss to gain $30.5bn in the first quarter as Saudis switched from investing in land to the stock market, and on renewed hopes the bourse will open up to foreign investors. During trading yesterday, the Tadawul climbed to its highest level since September 13, 2008.

The figures show Middle East and North Africa (Mena) markets are slowly clawing back last year's losses.

Egypt's main index, which contracted by $8.4bn last year as investors fled a revolution in which Hosni Mubarak was toppled from the presidency after three decades, was the second-best performing in the world in the first quarter. The EGX 30 has gained $3.8bn since January. "Egypt, being a part of the MSCI Emerging Market Index, has benefited from a global asset allocation perspective, and this has contributed towards higher foreign fund flows to the market," said Talal Al Tawari, the head of GCC equities at Gulf Investment.

In Tunisia, where a civil uprisingthat would lead to a wave of similar protests and revolutions across the Mena region began, the main index made a gain last year of $4.4 million after initial steep losses following the ousting of the Zine El Abidine Ben Ali from the presidency in January. The Tunindex rose by $50m in the first quarter of this year.

"We've seen three levels of Arab Spring," said Fadi Al Said, a senior fund manager at ING Investment in Dubai.

"At the beginning, when countries were experiencing some volatility, investors were cautious. Then Egypt and Libya had all-out revolution and the markets went into free fall. Now, after elections, there is some improved stability and our markets are starting to move higher."

Other North African countries have made more modest inroads into last year's falls in market value. Morocco, which lost $1.24bn last year, has regained $210m. Lebanon's main Blom index picked up $190,000 after losing $2.2bn last year.

"Some markets are still at level 1 of Arab Spring, and investors are asking 'are they going to move to level 2?'" said Mr Al Said.

Gulf markets also had mixed success in the quarter, with UAE indexes the best performers.

The Dubai Financial Market General Index gained $2.8bn of value after losing $5.8bn last year. The Abu Dhabi Securities Exchange General Index covered more than half its $9bn losses by gaining $5.6bn.

However, Kuwait, where $23.5bn was wiped off the value of its main index last year, managed to regain just $1.8bn in this year's first quarter. Oman's main index barely dented last year's $705m loss, retaking $20m in the quarter. Jordan managed to claw back only $9m of last year's $290m losses. Bahrain's main index picked up $30m after ending down $207m last year.

Analysts said weak economic drivers in lagging countries is keeping them unattractive to investors looking for bargains.

"The fundamentals of these countries is still a consideration," said Mr Al Said. "Morocco is not cheap. We've seen no earnings improvement, nothing dramatic. Jordan's stabilising but there is not momentum. It also has some debt issues. Bahrain, well we're still seeing investment banks and financial institutions in trouble and the government repricing natural gas."

As well as improving fundamentals, analysts and fund managers said deregulation of markets and lowering of barriers to entry would help in attracting foreign participation.

"Improvement in regulatory environment and facilitating new listings that ensure a wider representation of the key economic components in each country could be a catalyst," said Mr Al Tawari.