MENA Unrest and what it means for Investors?

The recent upheaval in Middle East has created havoc in the MENA stock markets. Some of the Indexes are amongst the worst performing on YTD basis (refer to earlier post dated 4th April 2011).

So what does it mean for investors?

There is already a lot of substance, on the said subject, available on internet. My post is an addition to already vast content available on the web. I’ll try not to deviate and be precise and keep this post small.

The current turmoil had created fear in the minds of investors as a result there is heavy selling of equities in MENA region.

Buy why? Numerous times I have stressed that “we should evaluating opportunities that often surface when pessimism, fear and uncertainty are high.” So why are investors having this SELL NOW feeling?

MENA region has 60% of world’s Oil & Gas reserves. Regional governments have huge current account surpluses; and with oil price at current level the reserves will bloat further. The region has young population that is expanding; as a result domestic demand is on course to increase in line with the population explosion. Governments have increased its spending and development budgets. Kuwait infra spending is expected to be appox $ 125 billion, Qatar $ 86 billion and so on.

All these positive factors will help local business to flourish and prosper. 

Lack of Accountability 

Over the years, companies in the MENA region have evolved and developed with regards to transparency, accountability, shareholders rights etc. So this is a less of a deter factor to invest in comparison to past. 

Is there any Appeal? 

Looking at valuations, the region still looks cheap. There are some high quality companies with strong management teams that have been sold off because of sentiment and fear. Those investors who are looking for a high-risk/high return investment and who don’t mind waiting a little longer for their return can still buy stocks in MENA region. 

Conclusion 

Investors should pounce on companies showing signs of earnings growth. As and when the unrest dies down and the storm clears-off, the region will once again see the light. 

Companies like Air Arabia and ADCB (in UAE), Mashraf Al Rayan Bank, (in Qatar), Burgan Bank and Kipco Holding (in Kuwait) appear to be undervalued.

Happy Investing!!