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Middle East - Gulf stock markets make historic gains in 2005

Capitalization up by 118 percent

Stock markets in Gulf Arab states made historic gains in 2005, more than doubling their total capitalization to well over one trillion dollars, driven by high liquidity and strong oil prices. Market capitalization in the six-nation Gulf Cooperation Council (GCC) surged to $1.146 trillion at the end of last year, up by a massive 118 percent from $526.3 billion at the end of 2004, Kuwait's Bayan Investment Co said in a report.

Total market value of the seven stock markets of the energy-rich GCC states stood at just $119 billion in 2000, making almost a nine-fold gain during the past five years.

The GCC groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The U.A.E. has the Abu Dhabi Securities Market and Dubai Financial Market while the other five GCC states have a bourse each.

Economists have attributed the sharp rise in trading value to abundant liquidity spurred by a sharp growth in oil revenues.

The six states are producing at almost full capacity of between 16 and 17 million barrels per day (bpd) and their daily income is believed to be close to $900 million.

Accordingly, the GCC states are expected to have earned over $300 billion in oil income in 2005.

A lack of other proper investment channels, particularly in the industrial sector, was cited by market analysts as another reason why private Gulf investors concentrate on equity markets.

The dramatic increase in value and turnover also propelled the market indices to all-time highs.

The Saudi stock market accounted for more than half of the GCC market capitalization at the end of December at $660 billion, 116 percent up on its end-2004 value of $306 billion.

The combined capitalization of the Abu Dhabi and Dubai markets grew to $234.4 billion on December 31, up by 63 percent from $144 billion a year ago.

Qatar's market value grew from $40.4 billion at the end of 2004 to $87.1 billion last year, a gain of 115.6 percent.

The Kuwait Stock Exchange capitalization rose 90 percent to $140 billion on December 31 from $73.8 billion a year ago.

The relatively smaller stock markets in Bahrain and Oman increased by around 29 percent and 24 percent last year to $17.3 billion and $11 billion, respectively.

Turnover in the seven bourses also surged by 148 percent to $1.368 trillion from $552 billion in 2004.

The Saudi bourse accounted for $1.1 trillion or 80 percent of turnover in all the GCC equity markets.

It was followed by U.A.E. markets with $138.9 billion and Kuwait with $97.3 billion.

The Dubai Index rose 132.4 percent, followed by the Saudi Tadawul All-Shares Index which gained 103.7 percent.

The Kuwaiti index rose 78.6 percent, Qatar by 70.2 percent, while Abu Dhabi increased by 69.4 percent. The markets of Oman and Bahrain rose by 44.6 percent and 23.8 percent, respectively.

Gulf and foreign experts told a symposium in Kuwait last month that they expected the Gulf bourses to continue booming at least in the mid-term, though they could encounter some painful corrections.

The stock markets of Qatar, Kuwait, the U.A.E. and Saudi Arabia came under strong correction pressure in the fourth quarter of last year, prompting them to shed part of their gains.

However, experts expect the bourses to prosper thanks to higher spending, especially in the energy sector where between $200 billion and $500 billion is expected to be spent over the next 25 years.

Beirut,01 09 2006
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