With the rise of Qatar and the UAE as new Emerging Markets, several investment opportunities are attracting foreign investors to the region.
With the Global Financial Crisis a weight on the exports of both those countries, India and China are seeing macro scale corrections in their inflation adjusted returns, and more and more, experts are moving towards the sustainable potential found in the Middle East markets.
A major sign of that higher level of investor interest is the new avenue for investments open to Qatar and UAE as they joined the MSCI (Morgan Stanley Capital International) Emerging Markets index.
This is the first time that any Middle East country has been included in the MSCI index — with Morocco a former member.
The inclusion does mean new limelight and focus on foreign investors into the local markets, as in-depth scrutiny of local markets is carried out. In addition, new interest in local equity markets by foreign investors is key to boost equity investment which is much needed for local industries. Though equity interest lags real estate investment interest, still the ease and convenience provided by capital markets is an indication of things to come. In line with this, the latest Bank of America Merrill Lynch report has already named some of the top picks for both markets as Qatar National Bank in Qatar and real estate development giant Emaar in the UAE, to name a few.
The announcement of the World Expo to be held in 2020 shows that the UAE specifically, and the Middle East in general, have been recognized as not only part of an international economic boom — but inclusion in that prosperous club will facilitate even further investment prestige.
The bidding is between the BRIC countries and the UAE; and the inclusion of UAE in the group shows that growth is predicted to be sustained in the long term in the region. The GCC countries have transitioned from being a single industry growth bloc, into a more robust and diversified economy and while other countries are losing their attractiveness, Dubai gains in its investment reputation is a welcome sight. Correspondingly, Merrill Lynch sees an additional growth of 0.5 percent up to 2020 and 2 percent growth in 2020.
Qatar has always relied on its natural resources to be the chief driver of economic development in the past. But several large scale projects have recently been announced which are expected to increase expenditures by the government leading to growth in other sectors of the economy.
The holding of the World Fair in UAE will have spillover benefits for the adjoining countries and Qatar can gain from this development, however, public debt still has to be managed in order to have a net gain in the coming period. Qatar National Bank is seen as the biggest winner from this, as new development would signal more loans for the bank and with an easing on the margins; the spreads will see profitable future for the bank. In terms of UAE, DSI and Emaar are seen as resilient in terms of the upshot that is be triggered by the investments.
With DSI already trading at a discount and Emaar’s upcoming projects, Bank of America Merrill Lynch sees both companies as strong buys.