Equity markets in the Middle East and North Africa (MENA) region present a considerable opportunity for investors focusing on emerging market economies, according to Emirates NBD Asset Management, Emirates NBD asset management arm of absolute ownership.
Speaking at the recent forum in Hong Kong, Yong Wei Lee, Director of MENA Equity Investments, Emirates NBD Asset Management, identified a range of investment opportunities in the MENA region, which has a combined GDP of $ 3.15 billion. In the current economic environment, it favors consumer, petrochemical and financial actions.
The GCC economies are expected to experience sustained economic growth in the short and long term as a result of increased government spending on infrastructure, which will be financed by current high oil prices, he said. The IMF has also recently improved the expectation of GDP growth for Saudi Arabia, Kuwait and Qatar in 2011 thanks to the increase in oil production and infrastructure spending plans. Countries such as Yemen and Egypt, on the other hand, had a growth perspective for 2011 that was downgraded due to the current political turmoil.
“The increase in oil prices and the return to political stability will be perceived by investors as positive catalysts for a solid performance in MENA shares,” said Yong Wei Lee. “The region is home to 60 percent of the world’s oil reserves and 40 percent of the world’s gas reserves.”
“The current valuation of MENA shares at 10x in the price / earnings ratio for 2011 is at an attractive level, which has a discount in prices / earnings of the global emerging markets of 11x,” he added.
Yong Wei Lee particularly emphasized the positive effect on MENA’s actions of the return to political and economic stability in the neighboring economies of the GCC, adding that an additional improvement in regional political stability is likely to augur well for the stock markets. .
He pointed out that there is generally a good correlation between the performance of the regional equity market and movements in the price of oil, although markets have continued to delay the strong performance of oil price movements, due to the continued instability in some countries.