Executive Summary
GCC equity markets, except Oman ended November on a negative note, with S&P GCC composite index registering a decline of 7.4%. Negative global sentiment led to broad-based losses across the GCC markets. The currency effect acts as a drag on the dollar-denominated returns of banks in emerging markets. Unlike other emerging markets where stock returns are undercut in dollar terms due to local currency depreciation, the GCC markets carry an inherent advantage that offers stable returns in dollar terms due to their currency peg. Banks such as ADIB and ENBD delivered strong double-digit returns at 37.2% and 24.2% respectively driving the returns of the UAE banking index in the last five-year period. Al Rajhi bank, Gulf bank and KFH were few top performers in Saudi Arabia and Kuwait and delivered annualised returns of 20.8%, 14.2% and 13.7% respectively in the last five years. GCC markets offer dual advantage: an environment apt for successful stock pricking to drive strong performance and steady dollar-denominated returns. This blend of stability and strong fundamentals positions the GCC and GCC Banks as potentially the best risk-reward proposition for active EM managers over the near term.
