In the 4th quarter it was all about Saudi and Egypt. In the years with lower oil prices Saudi has been forced to adapt to the lower oil price regime which has severely hurt economic performance. In the years following the collapse of oil prices in 2014, the Saudi stock index fell by 50%. The market seems to have finally bottomed out now. Saudi gained 28% in the 4th quarter while Egypt fell by 26% as the central bank finally let go of the peg to the USD. The Egyptian pound was devalued by a massive 48%, a painful but necessary move and it has greatly improved the economic outlook for the country.

In 2016 MENA markets were supported by higher oil prices but the stock markets of the region are only moderately correlated to price of Brent. Saudi is by far the world´s largest oil exporter and at one point the Saudi Arabian stock market, the Tadawul, was down 22% while Brent was up 40%. In the end all markets except Egypt, Tunisia and Kuwait managed to post marginal positive returns for the year. Brent got a big boost in November as OPEC agreed to cut oil production by 1.2 mn bpd. The IEA estimates that world oil demand grew by 1.2 mn bpd in 2016 and similar growth is expected for 2017, which means that we for the first time in many years could see a deficit in oil markets going forward.

Brent has continued to recover and as both OPEC and non-OPEC members are confirming that they are cutting production, the oil bull is looking like it will continue in 2017. With government spending in better order and additional revenue streams due to the recent low oil prices, the region is looking economically sound. The region is expected to deliver just north of 10% EPS growth for 2017 and looks fairly attractive at 12x forward P/E and a 4% dividend yield.