Stock indices continue their upward trend this year despite investor skepticism, with global fundamentals remaining weak as March came to a close. Last month markets were wavering between signs of improvement in the United States and the continuing European debt crisis, while in the Middle East and North Africa, several countries’ continuing instability kept investors wary on where to invest their money. Executive spoke to Lina Makarem, head of treasury at Lebanon’s BBAC Bank and Raj Madha, financial analyst at Rasmala, a Dubai-based investment bank, for their investment recommendations in these topsy-turvy complex times.
Lina Makarem
View on global markets:
Makarem is cautious with regards to the markets, as she does not believe we have seen the full extent of the negative repercussions from the European sovereign debt issues. “The measures taken so far are only postponing the problems and not solving them; the authorities are taking money to pay the bondholders but the population still has problems.”
Where would you put your money?
Her preferred sectors to invest in would be technology, “As it is hot now with the upcoming Facebook initial public offering.” She would also recommend the telecommunication and energy sectors. Having said that, she would prefer to hold onto liquidity in these challenging times, as there is too much volatility in the markets. She is not convinced that there are any solid opportunities anyway at this point. “You don’t know where you can go with your money with all that’s happening in the markets from the downgrades by rating agencies to new regulations; it is better to keep your money.”
Thoughts on investing in the MENA?
Makarem believes with all the turmoil still going on in the region, it is best to sit on the sidelines for at least the next six months. “Hopefully when new governance is put in place, there might be real opportunities.” For the time being, she likes Qatar and Saudi Arabia for the safety of the investments rather than for their returns. She is also optimistic on the United Arab Emirates. She is keeping an eye on Libya, but waiting for good governance to put be in place before starting to invest.
Thoughts on Lebanese securities?
Makarem believes stocks listed on the Beirut Stock Exchange are cheap but she is not that enthusiastic about them, as they remain highly dependent on the political situation. With some stability, she would look into the BSE as the listed companies have solid fundamentals. She also likes Lebanon’s government bonds despite the high level of sovereign debt, as she believes that the highly liquid banking sector, which owns around 70 percent of the sovereign bonds, can defend the security in case the value drops. “We have a lot of liquidity so that’s why you see some resilience.”
Raj Madha
Your thoughts on the markets?
Madha is cautious on the external environment and its effect on the MENA region. He sees potential for Europe to create more risk aversion in the region going forward. He also believes that the recent run in local markets, especially in the UAE and Egypt, will not last. “Not much has changed since the beginning of the year and we may see some caution going back into the market. I wouldn’t be aggressively buying for now.”
Main concerns?
Because Madha focuses on the financial sector in three markets — the UAE, Egypt and Qatar — his main concerns depend on the market in question. In the UAE, he is worried about future growth and believes the growth in lending will be difficult this year. In Egypt, there is no clear path to democracy at the moment and Madha is looking for further assurance on this front. For Qatar, he needs to see the projects that were put on the table throughout 2011 come to fruition and the government spending filter down to the economy.
Thoughts on Egypt given its strong rally year-to-date?
Madha believes the main question in Egypt is whether the political transition has gone far enough. One of the main risks at the moment is the balance of payments as the central bank’s reserves are drying up and Egypt will be facing trouble funding the current account deficit. According to Madha, the ideal scenario would be for tourism to come back strongly, which would narrow the current account deficit. Another option would be for an increase in foreign direct investment.
Top financial stocks in the region?
For the financial sector in the MENA region, Madha would buy Commercial Bank of Qatar, Emirates NBD and First Gulf Bank.
