Securities & Investment Company (SICO), the Bahrain based securities house, recently delivered its outlook for GCC markets at a major Financial Times Middle East Summit held in Bahrain. The “Middle East Financial Services Summit” held on 2 May was attended by leading financial services experts from across the region to present new ideas and insights into how GCC financial markets are developing.
Speaking to delegates at the summit, SICO’s Head of Asset Management, Mr. Shakeel Sarwar, said, “The region has seen strong economic growth over the past couple of years with real GDP growth rates running at between 6 and 7%. Markets have developed with this growth, meaning the GCC now has 152 companies with a market capitalisation of more than US$1 billion.
“Following the growth of corporate earnings across the region, we expect earnings to slow down in 2007. We believe corporate earnings growth will remain in line with or be higher than GCC markets’ GDP growth rates.
“Following the market corrections of late 2005 and 2006, SICO believes that GCC markets are, on average, 20% below fair values. Future returns are expected to come from an expansion in price/earnings multiples and growth in earnings.”
During the presentation, SICO detailed to delegates how the market corrections of 2005 and 2006 had seen valuations across all GCC markets contract substantially, a situation which has persisted despite the GCC now being favourably valued when compared to other emerging markets such as China and India.
SICO believes additional factors further underline the investment potential of the GCC. All GCC countries will continue to generate budget surpluses whilst the oil price remains within its expected range of US$55-65. Around US$1.2 trillion is also expected to be spent on real estate, oil and gas and power generation projects over the next few years, further enhancing GCC economies. With a large proportion of the region’s population in the economically active segment, demand for consumer, financial and real estate products is expected to remain high. In addition, compared to other developing markets, the GCC’s consumer financial sector remains largely under-penetrated.
Key risk factors were also outlined during the presentation, including the risk of slower global economic growth putting pressure on oil prices, the possibility of a real estate correction and other risks.
SICO’s Asset Management has built the longest track record for equity management in the region, with over US$400m of assets under management. SICO Funds have consistently produced impressive returns outperforming benchmarks and similar funds.
Securities & Investment Company is a securities house offering a selective range of investment banking services, including asset management, brokerage, market-making and corporate finance, on a regional basis and with a particular emphasis on Bahrain. SICO was incorporated in Bahrain in 1995 and holds an investment-banking license from the Bahrain Monetary Agency.
Information on SICO’s services and products are available at www.sico-bahrain.com
