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Gulf Telecoms, Energy Firms Seen Attractive in 2009

Any recovery of the region’s ailing bourses, however, may be curbed by a lack of liquidity after the global financial crisis triggered a mass exodus from emerging markets.

In the United Arab Emirates, stable demand and strong cash balances in the telecoms sector single out the likes of Emirates Telecom (Etisalat) as a promising bet in 2009, said Ahmed Hamdy of Prime Emirates.

“Whoever still has cash now should be targeting the telecoms sector,” Hamdy said. “Most of those companies have strong cash balances. They are not really into investments and, even if they are expanding, they rely on cash. Also, demand is always there.”

Healthy cash cushions as well as the prospect for higher oil prices also make energy investment firms such as Abu Dhabi National Energy Co (Taqa) and Aabar Investment attractive long-term bets, Hamdy added.

Analysts in a Reuters poll saw oil prices rising early this year from 2008 lows of less than $40 a barrel.

“Aabar is a stock that is sitting on a big pile of cash, and if you have that you will start fishing. There are now so many good (acquisition) opportunities here and abroad,” he said.

Omani telecoms and energy firms are also seen as appealing.

Oman Telecom (Omantel), Shell Oman, Oman Oil and Al Maha Petroleum, could attract attention, said Adel Nasr of United Securities in Muscat.

“These are the most stable stocks in the market,” Nasr said.

In Saudi Arabia, the world’s biggest oil exporter, crude prices will play a large part in determining share performance this year, said Rami Sidani of Schroders in Dubai.

“Sentiment is going to be fairly correlated with oil prices,” he said. “Petrochemical firms have suffered a lot and production prices have witnessed a very sharp correction. Any rebound will have a positive impact on the share prices.”

The kingdom’s robust public spending plans for the year will also help to underpin prices on its bourse, he added.

Banks — to be Avoided?

As the credit crisis hampers the brisk business once enjoyed by Gulf Arab lenders, who provided funding for the region’s vertiginous expansion projects, investors may give the banking sector a wide berth during 2009.

“(In Qatar) banks are going to be hit really hard ... a lot of government projects are being put on hold. This might affect the services industry too,” said Amro Motasim of Ahli Bank.

In Kuwait, too, the banking sector is seen struggling this year after the global turmoil dealt the Gulf Arab state severe blows towards the end of 2008.

Two of its biggest investment companies, Global Investment House and Islamic firm Investment Dar, were forced to seek $1 billion each to help meet debt obligations, and one lender, Gulf Bank, had to be rescued by the Central Bank after suffering steep derivative losses.

“Investment companies are in bad shape in Kuwait because of the crisis and the drop in the value of their investments,” said Sidani.

“The exposure of the banking sector (in Kuwait) to these investment companies is weighing on the bourse,” he said.

“Real estate is a bit spooky for me... there needs to be more clarity on these companies, externally and internally,” Hamdy said.

Much of this year’s performance will be determined by the amount of liquidity the region’s bourses attract.

“Even if I have cash I will hold back a little bit until things are clearer and I know where most of the world is heading,” Hamdy said.