Speaking at the recent International Adviser Hong Kong Expert Investor Forum 2011, Yong Wei Lee, head of MENA equity investments, Emirates NBD Asset Management, identified a range of investment opportunities in the MENA region, which has a combined GDP of US$3,150 billion. In the current economic environment, he favours consumer, petrochemical and financial stocks.
The GCC economies are expected to witness sustained economic growth in the near and long term as a result of increased government spending on infrastructure, which will be funded by the current high oil prices, he said. The IMF has also recently upgraded the 2011 GDP growth expectation for Saudi Arabia, Kuwait and Qatar on the back of increased oil production and infrastructure spending plans. Countries such as Yemen and Egypt on the other hand, had their growth outlook for 2011 downgraded due to the current political turmoil.
“Oil prices and regional stability are important drivers for equity markets in a region that is home to 60 per cent of the world’s oil reserves and 40 per cent of global gas reserves,” said Yong Wei Lee.
“High oil prices will eventually lead to robust earnings growth, which is positive for regional equities. “The current MENA equity valuation at 10x 2011 price/earnings ratio is at an attractive level, which is at a discount to global emerging markets price/earnings of 11x,” he added.
Yong Wei Lee particularly emphasised the positive effect on MENA equities from the return to political and economic stability in the neighbouring GCC economies, adding that further improvement in regional political stability is likely to bode well for the stock markets.
He pointed out that there is usually a good correlation between regional equity market performance and oil price movements, although the markets have continued to lag the strong performance in oil price movements, due to continuing unrest in some countries.
