DOHA: Driven by the region’s BIG 3 — Qatar, Saudi Arabia and UAE — the GCC equity market will remain overweight for the next three to six months, the monthly “Investment Outlook” report released by QNB Group Investment & Fund Management noted yesterday.
The Global Outlook that projected GCC’ s equity market ‘positive’, said the region is trading at high valuation supported by double digit growth for 2014.
“We are expecting the rally to continue going forward up to dividend season, driven by liquidity and high dividend expectations. Fundamentals remain intact in the region, however geopolitical risks remain a threat”, the analysts said.
The report that also put the Emerging Market (EM) on positive pedestal noted external rebalancing is ongoing in most EM regions. Current account balances are broadly improving in Asia and EMEA, but steadily deteriorating in Latin America.
The region appears less attractive from the standpoint. Beyond external balances, the structural reforms theme is crucial for EM assets.
The Investment Outlook is neutral/negative on the US equities. “We are neutral on the US over 3 months due to the current robust growth environment, but remain underweight over 12 months, as valuations are high and margins around peak levels.”
On the macroeconomic fundamentals, the report noted Saudi Arabia’s Q2 real GDP growth came in at a lower-than-expected 3.8 percent on a significant slowdown in the oil sector. Against this trend, the HSBC PMI index improved in August to 60.7, the best reading since July 2011, indicating stronger non-hydrocarbon growth.
UAE’s August PMI hit a new record high. We, therefore maintain our growth forecast for the region at 4.5-5.0 percent for 2014 and 5.0 percent-5.5 percent in 2015. The report that put the EM on negative noted its growth continues to slow. “The Brazilian government cut its growth forecast to 0.9 percent for 2014 on flat growth in the first half of 2014.
“The US economy seems to be picking up steam in Q3, while the Eurozone remains weak. China’s economy rebounded in September on higher foreign orders and a monetary stimulus from the central bank. Emerging Markets continue to weaken on the aftermath of the US tapering of Quantitative Easing. Non-hydrocarbon growth remains strong in the GCC, whole Sub-Sharan Africa’s outlook is dented by the outbreak of the Ebola virus”.
The Peninsula
