Markets outlook bright for 2011

Currency wars, eurozone chaos and the rise of emerging markets, 2010 was a roller-coaster for traders. So what does this year have in store? Five experts give their take on 2011.

A worker oversees the press process at RAK Ceramics Factory. Fadi al Said, of ING Investment Management, thinks the company will outperform again this year. Jaime Puebla / The National

Global markets came off life support last year but Gulf equities lagged behind the double-digit gains posted by stocks in many other regions. The UAE's bourses were particularly sluggish. The outlook, however, appears much brighter for this year, in part because of higher oil prices. But analysts are not quite ready to issue a clean bill of health, with concerns remaining about European sovereign debt and Chinese monetary policy. UAE bourses also need to see more liquidity and an improvement in the property market. With a new trading year set to begin today, we talk to some of the top investment experts in the region about how they see the next 12 months shaping up.
Sameh Hassan, a fund manager at Duet Group, Dubai:
Looking back: the year closed out on a good note with regional markets beginning the recovery that they seemed to miss out when the rest of the world and emerging markets rallied following the credit crisis. Capital markets have opened up after having been effectively shut down for almost two years, as evidenced by the year-end flurry of new issues in both the credit and equity markets.
Top picks for this year: Saudi Pharmaceuticals is the largest manufacturer of generic and branded drugs in the kingdom. The company has no debt and its cash and liquid investments include stakes in companies such as TASNEE, Yansab and Saudi Industrial InvestmentGroup. The company has a dividend yield of nearly 5 per cent as well.
Top MENA market for the year: Saudi Arabia, because the publicly traded companies in that market have the highest earnings leverage to rising commodity prices.
What investors should be watching this year:pay close attention to Treasury and bond yields in general across the board. This will have enormous impact on highly indebted governments and highly levered companies.
Fadi al Said, a senior fund manager at ING Investment Management in Dubai:
Looking back: It turned out not to be a bad year after all, although UAE markets were still down for the year. The regional markets in aggregate managed to close the year positively.
Top picks for this year: RAK Ceramics is still at the top of our holdings in the fund, so having it at this position means that we think it will outperform again this year. This is simply a valuation play, even after the stock has climbed by more than 70 per cent this year. After paying back a lot of debt is in a good position to start paying cash dividends.
Top MENA market for this year: I will take my chances by saying UAE markets. My opinion is based on low expectations with markets not pricing in any positive surprises, a possible trough in real estate prices and provisioning from banks.
What investors should be watching this year:data coming out of China.
Khaled al Masri, a partner and the head of brokerage at Rasmala Investment Bank in Dubai:
Looking back: the least-leveraged economies with the strongest banking sectors, Saudi, Qatar and Egypt, did the best amongst the main MENA markets.
Top MENA market this year: Egypt remains attractive in general and we would expect another year of high single-digit returns. The country did well despite limited flows from regional and foreign investors. Ample domestic liquidity more than offset the lower levels of inward investment from regional and foreign sources.
What investors should be watching this year:we will be monitoring bank lending statistics as anaemic growth in lending in most GCC economies has led to low levels of economic and stock market activity.
Rameshwar Tiwar, a fund manager at National Bank of Abu Dhabi:
Looking back: "Differentiation" would be the right word to sum up the performance for Gulf equity markets. Overall it was a tough year in spite of a good start for the markets as a whole.
Top picks for this year: The petrochemical sector in the GCC should be one of the best performers … because of the low cost feed stock advantage, rising oil and its derivative prices and expected upsurge in demand as the global economy rebounds.
Top MENA market for this year: Qatar is expected to keep on surprising the market, with strong real GDP growth rate of 18 per cent expected, as per the IMF. The hydrocarbons sector is expected to grow at 20 per cent. As most of the [liquefied natural gas] projects are ready for the supply and expected to add to the country's fiscal and external surplus. There is a high possibility that the Qatari market may be included in the MSCI Emerging Markets Index, and we expect any such move may catapult the Qatari market valuation in line or at premium to the major emerging markets.
What investors should be watching this year: GDP growth rates for the world and Gulf region. While global GDP is expected to grow at 4.2 per cent next year, according to the IMF, growth rates for GCC economies range from 3.2 per cent for the UAE to 18.6 per cent for Qatar. We expect equity markets in countries with higher GDP growth rates and moderate inflation to have better performance in 2011.
Rami Sidani, the head of MENA region portfolio management at Schroders Investment Management in Dubai:
Looking back: a very good year for global markets - developed, emerging and our markets in particular. Our regional markets outperformed global emerging markets by more than 6 per cent this year. Oil prices closed higher towards the end of the year, which has been supportive for the region.
Top picks for this year: We are bullish on the Qatari banking sector, as they will be financing some of the largest projects in the region.
Top MENA market for this year: Qatar again. It is the fastest-growing economy in the world and expects to continue growing in double digits this year. The winning bid for the 2022 FIFA World Cup has been a strong boost for the equity markets, with US$70 billion (Dh256.9bn) expected to be spent on infrastructure.
What investors should be watching in this year: any deterioration on sovereign risk in Europe will clearly have an impact on the sentiment in our markets. After all, we are part of the global economy. Oil prices are extremely important in this part of this world, and severe deterioration on the global front may put pressure on prices.
 
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