Qatar earnings seen to ‘surprise on positive side’ in 2014

Corporate earnings that have been moderate for the past years in Qatar could “surprise on the positive side” in 2014, Kuwait Financial Centre (Markaz) said in its recent outlook on GCC markets.
The report expects full year earnings in 2013 to have grown by 10% for Gulf Cooperation Council region.
In 2014, Markaz believes real estate sector will be the “driving factor” underpinned by banking and financial services. The petrochemicals sector is expected to remain muted in 2014.
It estimates full-year earnings for the GCC region this year to be at 12%.
“At the end of first half of 2013, we had neutral views on Saudi Arabia and Kuwait and positive views on UAE, Qatar, Oman and Bahrain. We were mostly right except for Saudi Arabia, which rallied higher as talks of regulatory reforms to open up the equity market for foreign investor’s direct participation boosted sentiments. UAE markets, Dubai and Abu Dhabi, though positive surpassed our expectations,” the report said.
GCC markets had a “phenomenal year” with most markets registering double digit gains in 2013. Performance of GCC markets was on par with their developed peers and better than emerging markets. The S&P GCC Composite index closed at 118.6, gaining 24.4% in 2013.
UAE markets hogged the limelight in part due to inclusion in ‘MSCI Emerging Index’, with Dubai index producing stellar returns of 107.7% and Abu Dhabi index registering strong gain of 63.1% in 2013.
Strong expansion in P/E multiple amidst robust earnings growth on the back of healthy rebound in real estate markets and revival of business confidence sustained the rally.
Qatar’s stock index, which was also included in the ‘MSCI Emerging Market’ index, returned 24% in 2013. GCC heavyweight, Saudi Arabia ended the year with a 31% gain. Oman and Bahrain recorded healthy gains in the range of 17% to 18% in 2013.
In Kuwait, while the KSE price index delivered a gain of 27.2%, Kuwait’s weighted index returned 8.4%.
The highlight of 2013 was the long expected MSCI upgrade of UAE and Qatar to “emerging market” status, Markaz said.
The move is set to take effect in Q2, 2014, with the UAE accounting for 0.4% of the index and Qatar accounting for 0.45%.
Economic growth in the GCC region is expected to sustain at 4% in 2014, driven largely by social spending, initiation of infrastructure projects and large-scale subsidies amidst unrest in neighbouring nations, the report said. Increasing oil production elsewhere and easing of sanctions in Iran is further expected to put downward pressures on global oil price.
With most GCC nations holding back their investments to ramp up production capacity, oil-based real GDP growth is expected to slump from 5.4% in 2012 to 0.4% in 2013.
Though the breakeven price of oil is still much lower than the prevailing market price, the rates at which the breakeven price had increased over the past two years are “alarming”, particularly in the case of Kuwait (32.6%), Qatar (44.2%) and Oman (19%), Markaz said.
Ongoing shale gas revolution in the US, slowdown in commodity super cycle and a sluggish global outlook presents immense challenges for GCC region, which has been excessively reliant on oil receipts to fund their economy in the long-term.
“Inflation in the GCC is expected to rise only marginally from 2013 levels, as commodity prices (especially food) are relatively benign. Fiscal surplus though robust is expected to be on the declining trend, as government expenditures keep raising while oil revenues remain moderate,” Markaz said. Gulf Times

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