Middle East Countries May Surpass Emerging Markets on Yield

According to Franklin Templeton Investment Management Ltd., Middle East markets will be outperforming emerging markets because of the higher dividends and the state-funded expansion. This is going to lure the investors who are always hunting for better returns on their investments. In 2012, The MSCI Emerging Markets Index registered a total gain of 15%, much ahead of the 3.7% gain of the GCC 200 Index of the Gulf Cooperation Council. However, the Middle East shares gave a better dividend yield of 3.87%, if compared to that of the emerging markets. For MSCI Emerging Markets Index, the same was 2.67% for last year.

Incidentally, the stock prices of the Middle East had trailed to the Emerging Markets stock prices for the past 5 years, but, thanks to the supportive regional fundamentals, the situation can change in 2013. 

The unrest in different countries caused the share prices of Middle East region big time. The debt crisis of Dubai added to the investor woes. However, as GCC is investing its oil wealth for public welfare and for building the stadiums to host the 2026 Qatar FIFA World Cup, the momentum is slowly returning.

According to the forecasts, economies of the Middle East countries will grow by 3.6% in this year. This growth rate is actually thrice of that of the developed nations’ average growth. In the past 4 years, the MSCI Emerging Market Gauge has increased by 85%; on the other hand, the GCC equities, during the same time frame, have gained 17%. The benchmark stock index of Egypt, on the other hand, has increased by 19%. The biggest stock exchange of the Arabian countries, Saudi Arabia’s benchmark index recorded a rally of 6.8% in last year.

Compared to trading volume of 62 million in the 4th quarter of 2011, the same has now jumped to 119 million in 2012, for Dubai. The oil prices are also pretty high as the Crude Oil has increased by 1.7% and is currently priced at $93.42 per Barrel. Brent Crude, on the other hand, has been over $100 per Barrel, consistently for the 2nd year.

According to analysts of Franklin Templeton Investment Management Ltd., the Middle East countries have been able to amass considerable amount of capital surpluses in the last 10 years. The low debts and ample reserves have also helped their case.