GCC stocks up, global markets slump

The bourses of the Gulf States all ended in positive territory last week despite, or perhaps because of, the huge sell-off in global financial markets.

With oil prices steady around $25 per barrel, and economic reform programmes now moving rapidly ahead, local investors are feeling confident about their domestic economies. They are also apparently unconcerned about the impact of a possible US attack on Iraq, or the economic repercussions of the ongoing Israel-Palestine conflict.

In a relatively quiet week in the GCC stock markets, Qatar enjoyed the biggest gain. The Doha Securities Market all-share index closed up by 5.3% at 2,254.94 points. Low interest rates and higher government spending are underpinning confidence, said brokers.

But the three largest bourses also showed impressive gains. The Kuwait Stock Exchange gained 1.9% to close at 2,294.1 points. Saudi Arabia was up by 0.8 per cent to 2,788.66 points, and the UAE's Emnex up marginally at 2,007 points.

The Saudi market has benefited from a statement by the finance minister that privatization share issues will not flood the market with new shares. Instead some of them will be debt for equity swaps with state pension institutions which will be long-term holders. This has calmed market worries considerably.

As for international concerns, local investors have shrugged off the global slump in equities. Generally the feeling is that this means that low interest rates will continue to boost the GCC economies, and as the Gulf States have almost no exports to the USA apart from oil their exposure to an economic downturn is low.

Only if an economic collapse, as opposed to a stock market slump, were to impact on the oil price would GCC investors begin to run for cover.

In the meantime, local shares seem a safe investment in a difficult global financial market, and offer better dividends than a deposit account with the prospect of additional capital growth. By historic standards they are also cheap, as compared to global markets which are still expensive but getting cheaper by the day.