When it comes to being best in 2013, Arab stock exchanges and the corporations traded on them are a perhaps surprising but certainly worthy class of entrants. Surprising, because the region’s bourses have taken much longer than global equity markets to recover share values after the worldwide crash in 2008-9. Indeed, they were producing so little turnover in 2011 and 2012 that financial brokerages in the Gulf countries died in droves. Worthy, because Arab exchanges – especially those in the Gulf – ranged in the top tier of equity market performance this year.
The best index performance of them all came from every regional job seeker’s favourite emirate, Dubai. With a gain of about 80 per cent to its general index between the beginning of January and the middle of November, the Dubai Financial Market approached the end of 2013 set to claim a spot among the top four or five bourses with the year’s highest gains, worldwide.
Equally notable this year were the Abu Dhabi Securities Exchange (with a 53 per cent improvement to its index), the Kuwait Stock Exchange (with 38 per cent), and the Qatar Exchange and the Saudi Stock Exchange (Tadawul) completing the ranks of the region’s best bourses (with index gains of close to 30 per cent each).
Before delving further into the achievements of Arab bourses and stocks in 2013, one has to admit two things. The first is that stock markets globally had a year brimming with excitement. In New York, the Dow Jones reached record index highs and grew by a quarter in the year to mid November, exchanges in numerous EU countries reported gains of around 20 per cent over the same period and in Tokyo, the year’s biggest winner among developed economies, the Nikkei 225 soared 48 per cent higher after Japan’s government unleashed a pro-growth monetary policy.
The second thing is that being the best performing index or stock, whether for a session, a trading week or a year, is the most fleeting triumph possible. It’s no guarantee of future, or even ongoing performance. Particularly in a broad view, the only safe statements aren’t predictions or explanations but observations on the best performers. Even explanations of why a market is rising are at best partial and explanations of a stock’s sudden weakening, which have a habit of emerging after the fact, tend to supply neither help nor meaning.
Having said this, neither factor makes it less valid to recognise the extraordinary performance of Arab equities in 2013. Tens of stocks in the United Arab Emirates, Kuwait, Qatar and Saudi Arabia have outperformed their general indices in 2013, expanding share prices beyond expectations.
In discussing companies that are representative of the year’s Arab stock market achievements, some names are to be expected. Take Emaar Properties, for example. Up by 70 per cent from last year, the real estate company soared in the first quarter of 2013. It approaches 2014 with a market capitalisation of over 36 billion AED (or almost 10 billion USD) and its story of resurging demand in the past year is embedded in the return of Dubai as a city of big dreams.
Remaining in UAE real estate, Abu Dhabi’s Aldar doubled its share price over the past 12 months, showing that the emirate’s consolidation of development power through the mid-2013 merger with its chief competitor, Sorouh, has worked. It serves to show that the UAE’s flagship real estate companies, which were hit hard by the post-2008 downturn in the property sector, are seasoned as the result of a steep learning curve and are hopefully today much smarter companies than they were in pre-crisis days, when over-enthusiasm informed all the region’s listed property developers.
Banking and financial stocks play a large and sometimes outsized role in Gulf equity markets. The largest UAE banks, NBAD and Emirates NBD, shared in the growth with 12-month share price gains of close to 40 per cent for the former and almost 100 per cent for the latter. Notably, the Dubai Islamic Bank outdid both of its conventional (and much larger) peers in growth statistics with a 125 per cent rise, as recent results at the Sharia-compliant bank demonstrated its ability to digest the lending fallout from the property market’s bad years.
Looking at stocks that outperformed their market’s general indices in Kuwait, Qatar and Saudi Arabia, names like Agility, Ooredoo and Savola have been grabbing attention. Agility, the Kuwait-based global logistics company saw its share price increase 39 per cent in a year.
Telecoms operator Ooredoo, whose rebranding from the rather dull Qtel in February 2013 may signal the direction Qatar is going in telecommunications, enjoys a customer base abroad that is 30 times larger than at home. It reminds us of the drive other Arab operators have had for penetrating emerging markets. Its share price has increased by 33 per cent since mid-November 2012.
Savola, the diversified Saudi conglomerate with core interests in food and retail has outperformed the Saudi exchange’s index (TASI) by 16 percentage points since the start of the year and has risen by 40 per cent on a year ago. Its story is a reminder that not all oil produced in Saudi Arabia is necessarily classified as petroleum.
