By Satish Kanady
DOHA: With stocks across the GCC region having one of their worst Januarys on records, GCC markets are at tempting valuations after the crash.
The one-year forward PE ratio (price-earnings ratio) of GCC markets stands between 7.0-9.7x, lower than that of its emerging market peers, which makes them attractive. In the past GCC markets as Saudi used to trade at a premium to the emerging markets due to its dollar peg and subsidised energy costs. However, with prevailing lo0w oil prices and removal of subsidies, it’s hard to justify any premium going forward, Global Research noted in its report.
GCC markets are experiencing a huge selling pressures due to fall in oil prices, concern over China and Federal Reserve’s first interest rate hike, all spooking investors.
Amongst all GCC markets Saudi has been the biggest loser with a 16.9 percent fall, followed by Qatar (-13.8 percent), Dubai (-12.2 percent) Kuwait (-10.3 percent) and Abu Dhabi (-9.7 percent). However, GCC markets experienced a much awaited relief rally on January 19 as pessimism over China eased. Saudi and Dubai all rallied by more than 3.0 percent.
Kuwait’s “Markaz” yesterday said price-to-earnings multiple for Qatari stocks currently stands at 11.1x. Kuwait currently stands at 14.4x, a 5-year low for Kuwait. However, the index P/E in comparison with other major GCC markets such as UAE, Qatar and Saudi Arabia is trading at a premium. Despite the high level of P/E, the report remains neutral on Kuwait market from a valuation perspective due to other factors such as attractive P/B and dividend yield, the research note sad.
According to analysts at the Global Research, Qatar market witnessed a low of 8,527 this month, somewhere near the index’s 2006 levels. Saudi Arabia has touched a low of 5,397 in 2016 and Dubai index plunged to a low of 2,641 points-somewhere near 2004 and 2006 levels, respectively.
With oil prices expected to stay low for the foreseeable future, markets are pricing in for further measures.
Massive spending cuts and slowdown have spooked investors. Analysts at Global Research said: “We are witnessing re-rating of all the sectors. However, in the medium-long-run, the fiscal reforms will improve the attractiveness of the GCC markets as it will reduce their reliance on oil and related products”.
The Peninsula
