Middle Eastern stock markets have shed more than US$50 billion (Dh183.65bn) this year as foreign investors fled the region after uprisings toppled leaders in Tunisia, Egypt and Libya.
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Europe's debt crisis worsened the situation for markets that had seen tentative signs of recovery earlier in the year.
"It was probably the most volatile year I have seen in my career," said Fadi Al Said, a senior fund manager at ING Investment Management in Dubai. "Financial markets were dominated by headlines and risk aversion."
Egypt's stock-market, which closed for 55 days at the start of the uprising against the presidency of Hosni Mubarak, fell by 45 per cent this year, losing $22.7bn of its capitalisation. In Bahrain, where popular unrest also flared this year, the market declined by 20 per cent.
Abu Dhabi's and Dubai's exchanges, already suffering from weak liquidity, lost 11.6 per cent and 16.9 per cent of their respective capitalisations.
Valuations of many local stocks have hit fresh lows, fund managers say, but a lack of liquidity and interest is keeping investors from bottom fishing.
"There is a lack of confidence and interest in the market, and until we see a turnaround, we expect valuations to remain as they are," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.
Oman's index lost 16.2 per cent of its capitalisation, while Kuwait lost 17 per cent.
"The good thing is that everybody has low expectations for the coming year," Mr Al Said said. "There are unanswered questions related to politics and economy all over the place."
Every stock market in the region fell this year except for Qatar's, which gained a marginal 1.3 per cent thanks to increasing gas production, political stability and $88bn of planned government spending. Qatar has gained political prominence this year as a result of news coverage of regional unrest by its Arabic-language channel Al Jazeera and after it provided military support to the Libyan rebels who toppled the regime of Muammar Qaddafi.
"Qatar represents tremendous growth opportunities, from their hydrocarbon plans to infrastructure projects and the [2022 Fifa] World Cup," said Tarek Lotfy, the head of asset management at Arqaam Capital in Dubai.
Talk of Saudi Arabia's stock market opening up to foreign funds has stirred hopes among regional and foreign investors who wish to gain exposure in the country's dynamic petrochemical, banking and retail sectors. The country is expected to benefit from 250 billion riyals (Dh244.85bn) of infrastructure projects decreed by King Abdullah bin Abdulaziz Al Saud in March to keep up with the demands of a population that has quadrupled in 40 years.
"It will be great news for the region and boost the market," said Fathi Ben Grira, the chief executive of Mena Corp in Abu Dhabi. "Asset managers all over the world today have the same problem: where to put their money and where to look for opportunities. The only challenge for Saudi Arabia is the lack of disclosure on a regular basis and that company reporting is mainly in Arabic."
The Saudi Tadawul All-Share Index is down 3 per cent this year.
Gold trading picked up this year, with bullion reaching a high of $1,888.08 a troy ounce in September. The commodity has increased 9.2 per cent this year.
Total trading volumes in the first half of this year reached 580 tonnes, with exports down from 225 to 214 tonnes, according to statistics compiled by the Dubai Multi Commodities Centre.
Property stocks led Abu Dhabi's benchmark higher yesterday, after Aldar Properties said on Wednesday that it was selling some of its assets to the Abu Dhabi Government for Dh16.8bn. The international ratings agency Moody's Investors Service yesterday said the transaction was "credit positive".
Aldar, the capital's largest developer, rocketed 9.5 per cent to 92 fils a share. Sorouh Real Estate, the second-largest, surged 7.5 per cent to 85 fils. The Abu Dhabi Securities Exchange General Index jumped 1.5 per cent to 2,402.28.
The sale to the Government includes the Central Market, the Norman Foster-designed souq in the city centre, and hundreds of homes in Al Bandar and Al Zeina at Al Raha Beach.
"The sale of the assets was a positive development for Aldar," said Hassan El Salah, the head of institutional trading at Al Ramz Securities in Abu Dhabi. "By trimming the balance sheet and reducing debt, giving Aldar space to build something else for tomorrow."
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