In a sea of governmental change among many of the Arab countries in the Middle East and North Africa, stability and investment opportunities will be tough to determine.
The death of Osama’s bin Laden, the world’s most wanted terrorist, it is indirectly encouraging investors to take a closer look at possibilities in the region. Rise in oil prices since 2008 and ongoing civil protests, all help emphasizing the significance of the MENA region to the global economy.
Increased investor focus on the Middle East and North Africa is expected to be favorable, with eventual winners and losers, affected by the level of straightforward change in each state.
If the world’s stock market reactions to bin Laden’s death indicates what to expect from the Middle East North Africa markets, the prospect is still one of the high volatilities and sizable risk. Most stock markets saw only a short-lived rally last week.
This year through May 4, Dubai’s DFM Index had slipped 0.8%, Bahrain’s All Shares Indexes lost 2.5%, Kuwait’s KSE fell 6.6%. InSaudi Arabia, which has been largely unaffected by unrest in the region, the Tadawul All Share Indexes had climbed 0.9%.
The Middle East offers a long-term opportunity to invest in rapidly growing economies, but investors should always be aware of the risks inherent in investing in developing countries.
Those risks are not likely to end anytime soon. The revolutions in many Arab states have seen millions of people demand bigger participation and brighter economic prospect.
However, major institutional investors who seek global risk/reward exposure in these countries will want to see the political conflicts’ end, as they will need clarity to know that local capitalism can prosper in the Middle East, East and that leaders will respect the rule of law and lead in favor of democracy.
Despite all that has happened in the MENA region during the last six months, not much has changed in terms of its investment outlook.
Most cautious investors are expected to take a wait-and-see attitude on increasing investments in the Middle East.
The political conflicts have certainly taken a toll on MENA stock markets.