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Ranvir Nayar takes a closer look at how GCC’s stock markets are behaving
May 17, 2012 3:32 by kippreport
Stock markets are supposed to be in tandem with the economy, often leading the economy in expectation of its performance. And 2011 was a year of very healthy growth for all Gulf Cooperation Council (GCC) countries, with the average growth in GDP for the region exceeding six percent. Some countries, such as Kuwait, growing at 18 percent, while the largest economy in the GCC, Saudi Arabia, registered a growth of six percent, with the UAE following closely behind. However, GCC stock markets all declined in 2011. As a whole, the market capitalization of the GCC stock markets stood at $697bn, loss of seven percent compared to the year before, and the volumes crashed by 21 percent in the same period. While markets in Bahrain and Kuwait – both countries hit by political turmoil and instability – crashed by nearly 20 percent each. The performance of the Saudi bourse was much better in comparison, declining marginally by three percent only. Not surprisingly, the Initial Public Offering (IPO) activity in the market also remained extremely subdued, as sluggish market sentiment discouraged companies to approach the bourses. As a result, the year saw only nine flotations, with an aggregate value of $795.6 million, a hefty decline of nearly 55 percent compared to 2010.
Now, contrast that with the predictions for the regional economies for the year 2012 and the performance of the stock markets.
In 2012, economic growth is supposed to slow down, with regional growth of less than five percent, even though the oil prices