GCC markets are outperforming other emerging markets, buoyed by strong corporate news, high crude oil prices and a stabilizing situation regarding Dubai World, Kuwait Financial Centre (Markaz) said on Wednesday. MSCI GCC gained 7 percent in March, bringing the YTD gain to 12 percent, an outperformance of MSCI EM and MSCI BRIC, which are up just 2 percent and 0.8 percent, respectively, for the year. Monthly gains were led by the UAE, with Abu Dhabi and Dubai gaining 7.6 percent and 16 percent, respectively. Lagging for the month were Oman and Bahrain, gaining 0.12 percent and 1.9 percent, respectively. The news in the GCC centered on Dubai World's debt restructuring plan which garnered positive initial investor sentiment in addition to the $10.7 billion sale of Zain's African assets followed by an announcement of a high dividend payout for the year. Also during the month, Investment Dar formally petitioned for restructuring under the articles of the Financial Stability Law, making it the first company to do so. Qatar's gain was buoyed by the lifting of a ban on Qatari banks from investing in the local market, while in Saudi Arabia sentiment turned sour as money supply fell for the fifth consecutive month. Liquidity was up as both volume and value traded expanded in the GCC, the former by 35 percent while value traded expanded 37 percent to $32.4 billion. The largest expansion was in the UAE, up 178 percent to $5.35 billion. Liquidity lagged in Kuwait, with value traded increasing just 2 percent to $5.85 billion. Volatility in the GCC was down 19 percent based on Markaz Volatility Index. The decline was led by Saudi Arabia and Kuwait, where MVX fell 8 percent and 37 percent, respectively. After two consecutive months of decline, MVX in Dubai increased by 21 percent while three consecutive months of risk decline in Abu Dhabi was broken as MVX increased 1 percent in March. Global markets traded up as signs of stability entered the global economy. A softening US dollar also aided equity and commodity market returns. MSCI World gained 6 percent in March following a 1 percent gain in February, bringing the YTD gain to 3 percent. On a market cap weighted basis, The US contributed 2.3 percent to the gain while Japan contributed 0.7 percent. In the US, signs that the “jobless recovery” may be over began to emerge as a positive payroll report (162k rise) and a highly positive expectation concerning the services industry enhanced investor sentiment. In India, real GDP is expected to have grown by 7.2 percent for the year ending March 2010 while even more impressive growth is anticipated in China where real GDP is forecasted to have grown 11.6 percent in 1Q10 (annualized), which would be the fastest expansion in three years. Moreover, there is mounting US-led pressure for a revaluation of the Chinese yuan which is seen as providing Chinese exporters with an unfair advantage over US competitors. In the euro zone, the euro continues to weaken amid unresolved issues with Greece while other high deficit EU members, namely Spain, Portugal and Ireland, have pledged to abide by the EU deficit limit of 3 percent (of GDP) by 2013.
