Last year’s events reflect positively on 2014’s economic outlook for the GCC
The foundation set in 2013 indicates a bright future for the regional market
January 23, 2014 3:02 by kippreport
Supported by a number of major events, 2013 could be marked as the year of economic recovery, as the GCC stock market gained momentum and is looking at a positive outlook for 2014, albeit coupled with a necessary cautious strategy.
As Societe Generale Private Banking (SGPB) unveiled their economic outlook for 2014, during a media round table, the dominant sentiment was positive, with focus on better market conditions and economic normalisation.
Looking at the GCC market, SGPB highlighted three major events in 2013 that paved the way towards a general positive outlook for 2014.
According to Philippe Boutron, regional chief investment officer at SGPB there are three reasons behind this strong performance. He says: “We have seen the excellent performance of the stock market in the region, led by Dubai, then Abu Dhabi and Doha. This performance is mainly a combination of three factors, first the inclusion of these markets within Morgan Stanley Capital International.”
As these countries head towards the frontier markets, while still tapping into the emerging markets, which will attract two different types of investors and investments, Boutron adds that the stock market is also supported by an accommodative policy and encouraging monetary policy.
However, the fact that the UAE and Qatar will host two major global events gave the stock market a huge boost, in terms of investors’ confidence and diversifying the economy. Starting in 2020, the region will host three consecutive events, which will have a short- and long-term effect over the entire region. “Market is all about anticipation. From the Expo 2020 and the UAE’s 50th anniversary, to the Fifa World Cup in Qatar, the whole region will benefit from these events,” Boutron adds.
Still overconfidence may pose a big risk in the region’s market. Xavier Denis, economist and strategist at SGPB, says: “Local banks have a very strong capital base. There is a strong temptation to provide loans and meet the demand of upcoming projects, and since the regulations are very supportive, you always face the risk of building a white elephant.”