IMF survey of economic prospects suggests growth higher in 2006

GCC capital markets fell sharply in the first half of 2006, some by more than 50 per cent in less than three months.

'It was an unsurprising development in the light of the obvious truth that most markets were seriously overpriced at the end of last year. But the speed of the downturn was shocking. The evidence so far is that the stock market crash has had no pervasive impact on Gulf or Middle East economic trends. In fact, the IMF's autumn survey of economic prospects in the region suggests that growth in 2006 will be higher than it was last year',

said Edmund O'Sullivan, Editorial Director and Chairman of MEED's Capital Markets 2006 conference, in his opening address to the delegates.

With the region's GDP projected to rise from $600 billion in 2006 to $1,000 billion in 2010, an increase of 75 per cent, the region is enjoying a period of growth and prosperity unprecedented in its recent history.

Experts at the MEED's Middle East Capital Markets conference, at the Jumeirah Emirates Towers Hotel, predicted a bright economic outlook for the region. However, the region will have to brave challenges within the socio-economic framework that will decelerate the region's growth.

In his keynote presentation Dr. Henry T Azzam, Chairman - Dubai International Financial Exchange and founder & CEO of Amwal Invest, mentioned that a sharper slowdown in the US and the world economy could bring lower oil prices ($ 40's) and the bursting of the real estate bubble would reduce household wealth and overall consumption levels, and may test quality of bank's in the region.

The internal security and stability of the region remains paramount and the Arab governments are willing to delay liberalisation, democratic practices and political reform to preserve stability. A stronger Iran with nuclear capabilities has re-awakened concerns about Iranian ambitions and intentions, complicating the future political map of the region.

Dr. Azzam pointed out that the unraveling of stock market bubbles tends to be a complex and long process. Not all Arab stock markets have yet entered undervalued territories. A high degree of contagion exists across markets. Panic sales, triggered in one market, affect other markets in the region, regardless of the significantly different valuation multiples that exist across markets and listed companies.

'Buyers are not expected to suddenly re-emerge in droves and send markets back up. Most traders have lost money heavily and many are in deep debt, and it may take a long time before they are able to venture back into the market, even if they still have the will to do so. Only nimble investors and those who are able to successfully trade the market are likely to do well. This requires both luck to buy at the right time and discipline to implement tight stop loss strategy' said Dr. Azzam.

The opening day of the conference also featured a keynote address from Robert Gary, Chairman - Debt Finance & Advisory, HSBC Bank. Gary provided a perspective from London on the capital markets situation in this region; in particular as it relates to bond and equity market funding.

'Although the challenges are great, the GCC countries should not under estimate the importance of nurturing their domestic bond and equity markets to encourage the more efficient deployment of domestic and regional liquidity', highlighted Gary.

Gary concluded by making the case for a more integrated capital market for the region. 'I will argue that the commonality in the economic structure and ambition, together with a need to broaden the range of local currency products, all argue for a unified GCC capital market in the run-up to currency union. In the run-up to a single GCC currency there are practical steps that can be taken today to boost the prospects for a genuine regional capital market. These practical steps could include initiatives to achieve convergence towards a uniform regulatory framework.

With more than 250 delegates attending the conference, the two day event is set to stir timely debate on global and regional capital markets by over 51 speakers over 21 sessions.

Event sponsors include Commercial Bank, Dubai Bank, Fitch Ratings, Kamco, QNB and Shuaa Capital as gold sponsors; Al Qudra, HSBC and Makaseb as silver sponsors; and Victory Heights as conference sponsor.