Real estate sector to drive GCC markets in 2014

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GCC real estateThe real estate sector would be the driving factor for the GCC markets in 2014 underpinned by banking and financial services, Kuwait Financial Center (Markaz) said in its outlook on GCC markets for 2014. It said economic growth in GCC is expected to sustain at 4 per cent in 2014, driven largely by social spending, initiation of infrastructure projects and large-scale subsidies amidst unrest in neighbouring nations.

“At the end of first half of 2013, we had neutral views on Saudi Arabia and Kuwait and positive views on UAE, Qatar, Oman and Bahrain. We were mostly right except for Saudi Arabia, which rallied higher as talks of regulatory reforms to open up the equity market for foreign investor’s direct participation boosted sentiments. UAE markets, Dubai and Abu Dhabi, though positive surpassed our expectations,” the report noted.

UAE markets hogged the limelight in part due to inclusion in MSCI Emerging Index, with Dubai index producing stellar returns of 107.7 per cent and Abu Dhabi index registering strong gain of 63.1 per cent in 2013. The Qatar stock index which was also included in the index returned 24 per cent in 2013. GCC heavyweight Saudi Arabia ended the year with a 31 per cent gain. Oman and Bahrain recorded healthy gains in the range of 17 to 18 per cent in 2013. In Kuwait, while the KSE price index delivered a gain of 27.2 per cent, the Kuwait weighted index returned 8.4 per cent.

The highlight of 2013 was the long expected MSCI upgrade of UAE and Qatar to Emerging Market status. The move is likely to take effect in the second quarter of 2014, with the UAE accounting for 0.4 per cent of the index and Qatar accounting for 0.45 per cent. The introduction of the mortgage law in Saudi Arabia, market friendly initiatives taken by the new head of the Capital Market Authority, including synchronising Saudi market timings in-line with other GCC markets and review of subsidy programmes in Kuwait to rationalise expenditures and ensure sustainability of fiscal policy for the long-term were significant positive developments.

With most GCC nations holding back their investments to ramp up production capacity, oil-based real GDP growth is expected to slump from 5.4 per cent in 2012 to 0.4 per cent in 2013. Though the breakeven price of oil is still much lower than the prevailing market price, the rates at which the breakeven price had increased over the past two years is alarming, particularly in the case of Kuwait (32.6 per cent), Qatar (44.2 per cent) and Oman (19 per cent). The ongoing shale gas revolution in US, slowdown in commodity super cycle and a sluggish global outlook presents immense challenges for the GCC region which has been excessively reliant on oil receipts to fund their economy in the long-term.

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Reading Time: 2 minutes

The real estate sector would be the driving factor for the GCC markets in 2014 underpinned by banking and financial services, Kuwait Financial Center (Markaz) said in its outlook on GCC markets for 2014. It said economic growth in GCC is expected to sustain at 4 per cent in 2014, driven largely by social spending, initiation of infrastructure projects and large-scale subsidies amidst unrest in neighbouring nations.

Reading Time: 2 minutes

GCC real estateThe real estate sector would be the driving factor for the GCC markets in 2014 underpinned by banking and financial services, Kuwait Financial Center (Markaz) said in its outlook on GCC markets for 2014. It said economic growth in GCC is expected to sustain at 4 per cent in 2014, driven largely by social spending, initiation of infrastructure projects and large-scale subsidies amidst unrest in neighbouring nations.

“At the end of first half of 2013, we had neutral views on Saudi Arabia and Kuwait and positive views on UAE, Qatar, Oman and Bahrain. We were mostly right except for Saudi Arabia, which rallied higher as talks of regulatory reforms to open up the equity market for foreign investor’s direct participation boosted sentiments. UAE markets, Dubai and Abu Dhabi, though positive surpassed our expectations,” the report noted.

UAE markets hogged the limelight in part due to inclusion in MSCI Emerging Index, with Dubai index producing stellar returns of 107.7 per cent and Abu Dhabi index registering strong gain of 63.1 per cent in 2013. The Qatar stock index which was also included in the index returned 24 per cent in 2013. GCC heavyweight Saudi Arabia ended the year with a 31 per cent gain. Oman and Bahrain recorded healthy gains in the range of 17 to 18 per cent in 2013. In Kuwait, while the KSE price index delivered a gain of 27.2 per cent, the Kuwait weighted index returned 8.4 per cent.

The highlight of 2013 was the long expected MSCI upgrade of UAE and Qatar to Emerging Market status. The move is likely to take effect in the second quarter of 2014, with the UAE accounting for 0.4 per cent of the index and Qatar accounting for 0.45 per cent. The introduction of the mortgage law in Saudi Arabia, market friendly initiatives taken by the new head of the Capital Market Authority, including synchronising Saudi market timings in-line with other GCC markets and review of subsidy programmes in Kuwait to rationalise expenditures and ensure sustainability of fiscal policy for the long-term were significant positive developments.

With most GCC nations holding back their investments to ramp up production capacity, oil-based real GDP growth is expected to slump from 5.4 per cent in 2012 to 0.4 per cent in 2013. Though the breakeven price of oil is still much lower than the prevailing market price, the rates at which the breakeven price had increased over the past two years is alarming, particularly in the case of Kuwait (32.6 per cent), Qatar (44.2 per cent) and Oman (19 per cent). The ongoing shale gas revolution in US, slowdown in commodity super cycle and a sluggish global outlook presents immense challenges for the GCC region which has been excessively reliant on oil receipts to fund their economy in the long-term.

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