November proves to be a good month for GCC markets

After taking a beating in recent months, stock markets regionwide are breathing a sigh of relief, many of which offer attractive P/E ratios for yield-seeking investors.  

Global and Gulf markets bounced back in November after a few months of decline.

The S&P 500’s return for the month was 8.92%, taking its year-to-date gains to 20.80%, which almost makes up for last year’s 18.11% total return decline. The Dow Jones Industrial Average also rose 8.77% for the month and was up 8.46% year to date.

The United States economy grew faster than initially thought in the third quarter of 2023, but momentum appears to have since waned as higher borrowing costs curb hiring and spending. The 5.3% pace of growth, said to be the quickest in nearly two years, however, likely exaggerated the health of the economy last quarter. The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, residential fixed investment, and non-residential fixed investment, according to the Department of Commerce.

Central banks are also pausing the button on hikes after imposing higher rates over the past year to cool rising inflation. That has buoyed stock markets, as investors believe the monetary policy tightening is coming to an end and could even reverse next year.

Most global markets were also in positive territory during the month. The MSCI World Index soared 9.2% in November, while MSCI Asia Pacific shot up 7.7%. Several developed economies, including DJ Stoxx Index (up 6.4%) and FTSEurofirst 300 (up 6%) also enjoyed a relief rally.

MSCI Emerging markets were up 7.9%, with and Korea’s KOSPI (up 11.3%) and India’s Sensex (up 4.9%) among the top performers.

GULF MARKETS ON THE UP

All the Gulf markets ended in positive territory in November, with Qatar emerging as the best performing market. The QE20 Index reversed a 7.1% decline in October, with a 5.4% increase in November, reducing its loss for the year to 6.4%. Bank and financial services led the gains with a 7.5% increase, while consumer goods and services also rose 5.2%. The Qatar market has an attractive 11.97x price-to-earnings (P/E) ratio, compared to the regional average of 17.8 times.

Muscat also rose 2.5% during the month to cut its loss for the year to 4.1%. The market reversed two months’ consecutive losses, as financial services rose 11.66% and services shot up 11.48%. The market also saw a 93.67% jump in the value of shares traded. Muscat’s P/E ratio is 14.3 times.

Saudi Arabia, the region’s largest market by capitalisation, emerged as the fastest growing market in the region in November. The Tadawul All Share Index is up 6.7% year to date after rising 4.6% in November.

The index breached the psychological threshold of 11,000 points, with its performance attributed to a confluence of factors, including higher corporate profitability in the third quarter. Pharma, biotech and life science index secured the top spot with an impressive gain of 15.2%, followed by capital goods and consumer durables and apparel indices, which registered gains of 14.1% and 13.8%, respectively. On the flip side, the energy index and food and staples retailing experienced a marginal decline of 0.2% during the month.

Dubai remains the region’s best performing market year to date with gains of 19.7% after another 3% expansion in November. Despite the gains, the DFM All General Index remains attractive with a 8.8x P/E ratio.

The heavyweight real estate (+10.0%) and financial sectors (+2.5%), were the top performers in Dubai. In terms of sectors experiencing declines, the communication services index recorded a 3.9% downturn, concluding the month at 872.7 points. additionally, the consumer staples index saw a 2.5% drop, closing the month at 109.7 points.

Dubai Taxi Company’s initial public offering (IPO) attracted an unprecedented offer exceeding USD 41 billion in investor orders for its USD 315 million offering. This marks the highest oversubscription level ever recorded for an IPO to debut on the exchange. The IPO involved the sale of a 25% stake (equivalent to 624.75 million shares) by the UAE government at a per-share price of AED 1.85.

Across the emirate in Abu Dhabi, the ADX General Index rose 2.3%, but remains 6.4% lower for the year. Despite the declines for the year, the market remains the most inexpensive with a P/E ratio of 27x. Healthcare was the top performer with gains of 12.7%, followed by 10.1% increase by consumer staples. Consumer discretionary (down 6.6%) and basic materials (-0.5%) weighed on the market.

Boursa Kuwait marked a return to growth, with the Premier Market Index rising an impressive 2.1%. The market is the Gulf region’s worst performer with a 10.2% decline year to date. Basic materials (6.5%) was the top performer along with energy (up 4.7%), but insurance (-1.7%) and consumer discretionary (-0.9%) were in negative territory. The Premier Market Index has a P/E ratio of 13.3 times.

Bahrain also managed to eke out gains of 0.5% for November, making it only one of three Gulf markets that are in positive territory for the month. The Bahrain All Share Index is up 2.3% for the year on the back of gains from industrials (up 9.2%) and communications service (up 3.3%). Bahrain’s P/E ratio of 6.9 times makes it the most attractive among its neighbouring markets.