JEDDAH: Equities in Saudi Arabia and Qatar remain as the region's favorite markets, investment bank Credit Suisse Group AG said in its report Thursday. The bank recommended investors buy shares of Saudi Arabia's Saudi Basic Industries Corp., the world's largest petrochemicals maker, Almarai Co. and Etihad Etisalat Co (Mobily). It also recommended Qatari banks, citing the impact infrastructure spending will have on earnings. Saudi Arabia's Tadawul All Share Index gained 7.3 percent in the past 12 months, while Qatar's index Thursday climbed to the highest level since September 2008. "The Gulf Cooperation Council markets look set for a strong performance in 2011, possibly outperforming MSCI Emerging Markets," London-based analysts Mohamad Hawa and Anton Rozanov wrote in a report to clients Thursday. The region may benefit from improved global economic growth, attractive valuations, higher oil prices and stronger earnings momentum, the note said. A possible upgrade of markets in Qatar and the United Arab Emirates to emerging markets status at MSCI Inc. will also help boost shares, it said. "We continue to prefer Saudi Arabia and Qatar despite their outperformance in 2010. In Saudi Arabia, we still like domestic consumer plays (consumer spending momentum remains strong) and chemicals (firm petrochemical prices and expanding volumes), while we remain wary of banks (stricter regulatory provisioning requirements)," the report said. Qatar continues its economic momentum on LNG capacity expansion and we believe infrastructure spending (robust $100 billion pipeline) should boost the earnings and growth potential of domestic banks, especially the top three, given their high dominant position (combined lending market share of 60 percent) and reasonable valuations (P/B ranging from 1.7x to 3x and ROEs ranging from 17 percent to 26 percent). However, the report said Dubai debt woes would likely to remain in the headlines. "On our estimates, the aggregate (Dubai's GREs) amount of debt maturing in 2011 and 2012 is $17.5 billion and $17 billion, respectively. Dubai World alone has to repay an aggregate $13.6 billion over the next two years. Hence, we think there remains a chance of further rescheduling of debt. On the other hand, UAE banks are well capitalized, but earnings momentum could suffer from high provisioning irrespective of whether or not NPLs peak out in 2011 (NBAD and FGB remain our favorites), while real estate prices are likely to remain under pressure due to oversupply." The report remains "cautiously optimistic" on Kuwait, saying that while the "development plan is comforting, the mechanism to implement it is not clear." "We are likely to see the $100 billion invested over a more stretched period than the 3.5 years announced by Kuwait's development plan. The recently-announced investment regulations are only likely to benefit the large companies," Credit Suisse noted. The Gulf stock markets put in a mixed performance this week as investors evaluated annual results of listed firms, financial analysts said Friday. They also expected regional markets to keep a close eye on the surging oil prices that steadied this week above $90 a barrel as well as signals coming from the world's major economies about the stumbling global recovery. Saudi stocks continue their upward trend this week, deriving momentum from steady crude prices and expectations of good annual results mainly for the petrochemical sector. The Tadawul All Share Index (TASI) of the Arab world's largest bourse gained 0.24 percent, closing the week at 6,717.18 points at Wednesday close. "The results published so far have sent positive signals to the market about the performance of the petrochemical, retail and cement sectors," Saudi analyst Abdul Hamid Omari said. TASI apparently also came under pressure from the denial of reports that foreigners would be allowed to trade directly at the Saudi stock market. "This issue is not under discussion at least in the short term," Chairman of the Saudi Capital Market Authority Abdul Rahman Tuwajri said. The Kuwaiti stock exchange was the scene this week for speculative trading and profit taking moves that undercut prices. The KSE all-share index shed 0.56 percent, coming under pressure mainly from the banking sector and closing at 6,936 points. The United Arab Emirates shares led the region's losing stocks this week with the downward pressure coming mainly from the real estate and industrial sectors. The benchmarks of the Dubai and Abu Dhabi stock exchanges shed 2.62 percent and 0.53 percent to close respectively at 1,625 points 2,737 points.
