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Arab stock markets eying growth

BEIRUT — Arab countries are pushing for greater transparency in their stock markets to boost credibility in their exchanges following massive losses linked to the global economic meltdown, Arab market officials said Monday.

Fadi Khalaf, the secretary-general of the Union of Arab Stock Exchanges, said the indices of some Arab stock markets began a plummet of almost 65 percent in the three months following the 2008 start of the world’s worst recession over six decades. That decline compared to a world market average of just under 60 percent, he said.

The declines were a warning siren in the region, even as many of the Arab countries fared far better than their developed counterparts in terms of sustaining economic growth during the financial crisis.

“We are working to develop our markets to make them more transparent, clear and credible,” Suleiman al-Shahoumy, the chairman of the exchange union, said at the body’s annual conference in the Lebanese capital.

The push for reform comes as Arab economies are projecting rebounding growth rates following the financial crisis.

The International Monetary Fund said earlier this week that Mideast nations are likely to grow roughly twice as fast over the next two years as they did in 2009. But it also warned that the region must do more to diversify its economy and create jobs.

Strengthening the stock markets is seen as key to growth.

Khalaf said that Arab markets had been able to recoup about 30 percent of their losses until the end of the third quarter of 2010, compared to 52 percent in world markets and 68 percent in developing nations.

In some markets, such as Dubai’s, a large chunk of the losses stemmed from the property sector that took a battering as the financial crunch hammered world property prices. The banking sector was also hit, though far less than the West’s financial sector which was highly exposed to the real estate market.

Other stock exchange officials, however, said despite the weak showing, Arab markets had ample room for growth.

The Middle East and North Africa region’s market capitalization is 38 percent of the gross domestic product compared with 100 percent in developed nations, said Hussein Erkan, the chairman of Istanbul Stock Exchange and the Chairman of the Federation of Euro-Asian Stock Exchanges.

“There is huge growth potential in our region,” Erkan said.