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Regional opportunity. (Capital Markets).

Article Excerpt
If the case against investment in regional capital markets is founded on their thin, illiquid nature, it is becoming increasingly shaky. As the successful initial public offering (IPO) of a 20 per cent stake in Saudi Telecom last month or the sale of a major government stake in Bank of Kuwait & the Middle East last year illustrate, the GCC is potentially at the beginning of a privatisation-driven sale. In Saudi Arabia alone, heavyweights such as Saudi Railways Organisation, National Commercial Bank and possibly even Saudi Arabian Airlines are all marching towards the auctioneer's block.

In the face of weak and volatile markets elsewhere and growing political pressure for the repatriation of regional assets invested abroad, such sales will undoubtedly attract major inflows of capital. The likelihood is that such demonstrable liquidity -- combined with regulatory improvements currently slated for a number of the key regional markets -- will only serve to encourage the private sector to access regional equity markets.

The argument is reinforced by the impressive performance of regional bourses over the last three years. The broad-shouldered bear that has mauled international stock markets for the last three years has not visited the Gulf. The region has benefited from its lack of integration into the...

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