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In the last five years, gross domestic product in GCC countries has risen an average of 7%, according to Koon Chow, senior emerging markets strategist at Barclays Capital in London. In 2008, GCC countries should post 6% growth - a modest slowdown but much better than estimated global growth rates of 3.7%, as measured by purchasing power parity.
Including GCC interests in your portfolio adds a protective layer of diversification. Economists say Middle Eastern economies are decoupling from the US because so much of their growth is focused internally. That means they're protected from America's economic slowdown, since domestically focused industries won't be damaged by softness in U.S. demand. Meanwhile, oil revenues reinvested into local economies should help keep out Western credit-crisis woes.
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Citigroup Middle East and Africa equity strategist Andrew Howell pegs the region's correlation to world markets at about 40%, which means the GCC is unlikely to follow US equities' downward trend. Other emerging markets have a 90% correlation, making GCC investments a better bet.
Poorer but still fast-growing countries in the Middle East, like Egypt, are a valuable part of any region-wide investment strategy.
T Rowe Price's Africa and Middle East fund has 27.7% invested in the United Arab Emirates, 20% in Egypt, 17.1% in Qatar and 12.6% in Oman. Smaller holdings include equities from South Africa, Bahrain, Jordan, Lebanon and Nigeria.
The fund is up 3.29% in the year-to-date, much better than its S&P-linked equity Index 500, which is down 7.28%. You can buy into the actively managed equity fund with just $2,500 to get sizable exposure to the region.
Industry growth
Construction, real estate, telecommunications, banking and finance are some of the fastest-growing industries in the region.
Local investors support these industries by directing oil wealth into domestic share markets, which desensitises them to negative global trends. This makes GCC equities more appealing and likely to deliver above-average returns, says Barclay's Chow.
Accessing Middle Eastern equities, though, can be a challenge.
Staff Reporter
