GCC governments urged to tackle inflation

In spite of positive indications that Middle East markets are avoiding serious impact from a global slowdown so far, "there is uncertainty in the markets that needs to be addressed one way or the other," said Christian Mouchbahani, Middle East and North Africa CEO of investment bank and institutional securities firm Jefferies.

"Inflation needs to be tackled and it is not clear that channeling liquidity into real estate and stock markets will be enough," he said at the 3rd Middle East IPO Summit at the Intercontinental Hotel, Abu Dhabi, during a discussion by a panel of economic experts on the state of the regional equity capital markets.

By pegging their currencies to the dollar, most Gulf governments have, in effect, delegated monetary policy to the US Federal Reserve, Mouchbahani added. "It is a very sensitive situation and that's why the central banks are hesitant. But pegging to the dollar is further accelerating inflation and making it a difficult environment for commercial banks," he said.

Mouchbahani and other speakers agreed that there are many positive factors favouring the regional economies including higher oil prices, liquidity and investment levels. The immediate need was for careful management.

"Like our panelists, most regional analysts have a bullish outlook for the IPO market. Additionally, in the UAE, upcoming changes in regulations are expected to bring more floats of family-owned businesses," said Deep Marwaha, Head of Capital Markets and Investment for IIR Middle East, organisers of the IPO Summit.

"In the meantime, market momentum is expected to be sustained by improving corporate profits, robust growth in regional economies, increasing revenue from higher oil prices and an inflow of foreign funds seeking returns unavailable elsewhere.

"Global events that have nothing to do with the region impact performance here as the doors are opened to foreign investors. Above all there is a need for reduced volatility. In the current environment people want to know what the risks are."