The third quarter was another relatively strong one for the MENA region, sharply outperforming most developing markets, cheered on by oil prices at or above $80 per barrel. Qatar (+11%), Oman (+10%) and Kuwait (+9%) were the top performing markets, while in the Levant, Lebanon and Jordan dropped by 15% and 9% respectively. The performance in Qatar has been driven by the increase in foreign ownership limits, which has supported the market through passive inflows. Saudi was hurt by negative press and margin calls, while Egyptian shares, a part of the MSCI Emerging Markets Index, were on the losing end due to the ongoing high volatility in emerging markets. On a year to date basis, it is noteworthy that of all the stock markets in the MENA region only one manages to keep up with the performance of the price of oil, and that market is a net oil importer, namely Tunisia (+25%).

Despite a weakening outlook for the global economy, the prospects for the energy-rich part of MENA and especially the GCC is improving. Earlier this month the IMF upgraded its growth forecasts for GCC for 2018 and 2019. We believe there is a good chance that the region will enjoy a period of healthier growth and that stock prices could rally into the year-end. Structural changes such as improving foreign ownership limits and higher inclusion in MSCI and FTSE indices will also give support to the market. The Saudi market is trading at 16x Price Earnings Ratio (PE) which is slightly below its 10-year average while GCC markets ex Saudi are trading at their lowest level since the financial crisis.

Domicile: Malta Sources: Bloomberg

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