As per the annual report released by the Arab Federation of Capital Markets, during 2021, MENA equity markets witnessed strong performance with an upward trajectory in the majority of the markets, mainly led by the GCC equity markets which reported strong gains in line with the optimism seen in the global markets amid prospects of a global economic recovery mainly in the first nine months of the year, following Coronavirus vaccine rollouts.
In fact, this overall regional active performance was mainly boosted by improved investor sentiment after Brent oil prices touched $80 per barrel for the first time since October 2018, rising from US$ 51.8 per barrel at end-2020 to US$ 81.8 per barrel at end-2021, amid growing optimism over global demand recovery following strong US economic data and on OPEC’s upbeat forecasts for a global demand recovery, in addition to the on improving business activity in non-oil private sectors in some regional countries, mainly bolstered by the launching of a massive private sector investment plan in Saudi Arabia, as per Dr. Fadi Kanso, the head of research at AFCM.
However, MENA equity markets witnessed a flat performance during the month of September, as global equity weakness was combined with lingering concerns over the spreading Coronavirus Delta variant and slowing global economic recovery, along with the turmoil of China’s debt-ridden real estate “Evergrande” owing to the equivalent of more than $300 billion to Chinese and international lenders and weighed on investor sentiment.
In addition, during the month of November, MENA equity markets witnessed mainly a relative downward trajectory in prices, mainly dragged by price falls in the heavyweight Saudi Exchange and the Qatar Exchange, amid an extended oil slump on prospects of discussions between some of the world’s biggest economies over potentially releasing oil from strategic reserves to quell high energy prices, and tracking a global equity weakness which was already startled by inflation and interest rate hike concerns, had to contend with another negative trigger in the form of a new COVID-19 variant named Omicron.
The virus was labeled by the World Health Organization as a variant of concern at the end of November, stoking fears about the outlook of the global energy demand and economic recovery, when doubts about the efficacy of existing vaccines against the new variant dented the global risk appetite, as per Kanso.
Strong end to the year
But MENA equity markets ended the year 2021 on a positive note, as the eased fears about the severity of the new variant supported the global and regional equity markets despite countries re-imposing restrictions amid the continued spread of the Covid-19 variant, which pushes crude oil prices to rebound by near 12% in December, on reduced concerns about the global demand outlook, while OPEC+ left the door open to reversing its decision to boost output at any moment, vowing to make immediate adjustments if required, after raising its global oil demand forecast by 1.1 million barrel per day for the first quarter of 2022.
2021 Overall Market performance in Figures
MENA equity market capitalization reached $3,811 billion at the end of December 2021, up by a strong 18.0% when compared to end-December 2020, after a modest uptick by 1.8% over the previous year, mainly on the back of the strong yearly increase of 119% in the market capitalization of Abu Dhabi Securities Exchange, from US$ 202 billion to $443 billion, after ADCB has received an amended binding offer from TAT for Medical Services to acquire the bank’s 51.5% stake in Alexandria Medical Services in June, and after the listing of Mubadala-backed satellite operator (Yahsat) in July.
In parallel, the total value of shares traded recorded $872.4 billion in 2021, from $713.1 billion, up by 22.3% when compared to the previous year, mainly boosted by a remarkable increase of 408% in ADX traded value, constituting 51% of the total rise in the regional traded value. On another hand, the total volume traded reached 1,358 billion shares during the year 2021, up by 74.8% when compared to the year 2020, mainly on the back of a considerable increase of 124% in the traded volumes of the Iraq Stock Exchange, which represented around 86% of the total rise in traded volumes in the MENA region over the year.
Upward price movements
MENA equity markets recorded tangible upward price movements during the year 2021, as reflected by the S&P Pan Arab Composite index which is designed to track the performance of 11 equity markets. The latter recorded a considerable increase of 29.1% on a yearly basis, to reach 993.1 as of end-December 2021, when compared to a drop of 2.4% in 2020. In fact, the S&P GCC equity market index closed the year 2021 with a gain of 31.4%, marking the biggest gain since 2008, with a full recovery from COVID-19 and the oil-led decline of 3.7% in 2020, as all the markets in the GCC reported gains during the year.
In detail, Abu Dhabi was the best performing market amongst prominent equity markets globally with a gain of 68.2%. Saudi Arabia supported Abu Dhabi’s gains with 29.8% returns. Dubai and Kuwaiti benchmarks followed with gains of 28.2% and 27.0% respectively. Gains for both Saudi Tadawul and ADX were driven by a listing of several state-owned firms amid a climate of economic optimism, large-scale projects, and timely execution of plans.
2021 Main Arab Stock Exchanges Performance
Saudi Exchange- Highest annual leap in 14 years
Saudi Exchange, whose market capitalization represents circa 70% of the total regional market capitalization, registered strong price gains of 29.8% in TASI in 2021, the highest annual leap in 14 years and logging its sixth consecutive yearly gain, mainly supported by higher oil prices as Brent crude oil prices went up by 58% during the year, as vaccine rollouts bolstered the economic outlook, not to mention the repercussions of OPEC+ alliance first decision to keep most of their production cuts till August before its second decision to boost oil supply by a further 2 million bpd till December or 400,000 bpd a month, considered not enough to fill the looming shortage.
As such, TASI breached the 11,000 mark, for the first time since September 2014, mainly on improved sentiment after Saudi Arabia announced a super-sized decade-long private sector investment plan that is expected to drive strong domestic economic growth and support the kingdom’s vision 2030. Therefore, the Saudi non-oil private sector growth quickened to a seven-year high in September 2021, as reduced COVID-19 restrictions led to a boost in the non-oil economy. In summary, the Kingdom’s major indexes saw unprecedented gains that were driven by a wave of initial public offerings, higher dividends, improving oil markets, promising financial results for companies, and overall recovery from 2020’s pandemic crisis.
UAE Equity Markets- Positive sentiment around economy
The UAE equity markets posted strong price gains in 2021, with a 68.2% rise in the Abu Dhabi general index and a 28.2% increase in the Dubai Financial Market general index, mainly helped by supported strong price gains in realty stocks on growing optimism over property recovery in the UAE and helped by oil price gains, some favorable company-specific factors and the prevailing positive sentiment around the reopening of the economy and after the amended Commercial Companies Law allowing full ownership on the onshore company in the UAE that came into effect on the first on June.
In parallel, UAE decided to shift to a working week of four and half days with a Saturday-Sunday weekend from the start of 2022, in a move aimed at ensuring smooth financial, trade, and economic transactions with global markets and facilitating stronger international business links and opportunities for UAE-based and multinational firms. In addition, the markets were supported by price gains in realty stocks, on bets that UAE property prices would continue rising in 2022 driven by supported economic reforms and an accelerated vaccination program.
Abu Dhabi Securities Exchange (ADX)- IPO boosts
Abu Dhabi Securities Exchange posted strong activity over 2021, with the Abu Dhabi index exiting the year with a roar on its best annual performance in 16 years, after a series of initial public offerings (IPO) that helped push its performance higher during the year. ADCB has received an amended binding offer from TAT for Medical Services to acquire the bank’s 51.5% stake in Alexandria Medical Services in June whereby the potential buyer increased the offer price from AED 650 million to AED 750 million and after the listing of Mubadala-backed satellite operator (Yahsat) in July in an IPO worth AED 2.5 billion.
In addition, ADX signed in September agreement with Nasdaq to launch a derivatives market and deliver marketplace solutions, including matching, real-time clearing and settlement technology. The exchange launched a single stock futures and index futures in the fourth quarter of the year before expanding to a wider range of derivatives products. The initiative will further diversify investment avenues and provide investors with hedging tools for effective risk management. On another hand, ADX announced its partnership with FTSE Russel in September to provide the indices beyond 2021. There would be new licensing requirements and commercials involved in order to license the indices through FTSE Russel.
Dubai Financial Market (DFM)- Non-oil sector expansion
Dubai Financial Market recorded a positive performance during 2021 as realty stocks took a boost after Dubai home sales hit an eight-year high in 2021 amid higher demand for bigger homes. In fact, Dubai’s property market witnessed a pick-up in demand amid a wave of government reforms over the past 12 months, attractive mortgage rates, and a shift in demand patterns due to COVID-19.
In parallel, the non-oil private sector economy witnessed a solid expansion, the highest recorded since November 2019, suggesting the economy is moving closer to its pre-COVID 19 growth trajectory. In addition, In Dubai, Aramex’s share price skyrocketed in October when GeoPost, the express parcel arm of French Groupe La Poste, acquired 295 million shares in Aramex (representing a 20.2% stake in the courier firm), valuing the deal at AED 1.4 billion (the equivalent of $381 million).
In fact, the market’s performance was more impressive towards the end of the year after the announcement of a list of new initial public offerings that aimed to help develop the market’s liquidity and dynamism. Dubai announced plans to launch an AED 2 billion market-maker fund to boost trading and increase liquidity on the DFM. The Emirate also approved launching an AED 1 billion fund to support technology company IPOs and encourage innovative financial products and solutions. In addition, Dubai announced plans to list 10 State-owned companies on the DFM in an effort to increase the total volume of its stock markets to AED 3 trillion.
Boursa Kuwait (BK)- Transparent market
Boursa Kuwait excels across all facets of its operations in 2021 with a tangible in its index of 27.0% y-o-y. The company has won five acclaimed international awards in recognition of its efforts to develop a more transparent and solvent capital market. The awards celebrated the company’s outstanding contributions to the Kuwaiti capital market, marked investor relations performance, and remarkable support to the United Nations’ Sustainable Development Goals (SDGs). Boursa Kuwait was also voted the sustainable stock exchange of the year in the Middle East and North Africa (MENA), in addition to being honored for its endeavors to cultivate a culture of learning in the organization.
Qatar Stock Exchange (QE)- Non-Qatari investor ownership scheme
Qatar Exchange recorded a rise of 11.5% in prices, mainly supported by some favorable company-specific factors, on improved sentiment after Qatar shipped its first oil cargo to a neighboring GCC country, following a breakthrough agreement earlier in 2021 that has put an end to a more than three-year GCC suspension of diplomatic and trade ties. In addition, the Qatari cabinet approved in April a draft law to allow non-Qatari investors to own up to 100% of the capital of listed companies. The news boosted shares of large-cap stocks in the market resulting in cumulative gains in the QE index as the move would translate into the flow of additional funds in the market.
Casablanca Stock Exchange (CSE)-Market evolution
Casablanca stock exchange ended the year 2021 on a strong rise of 18% in MASI, after dropping by 7% in 2020. The activity had experienced a mixed performance at the beginning of the year, before recording upward trends as the economic situation improved over the year. This trend was accelerated during the month of September after the results of the elections. In fact, the overall evolution of the market in 2021 was very positive before experiencing a small downward correction towards the end of the year due mainly due to the lack of visibility which began to take shape since the appearance of the Omicron variant.
However, the progress of the stock market is well-founded, the recovery of the economy and the improving health situation triggered by the vaccination campaign during the year favored the progress of the market. Not to mention the positive achievements of the listed companies and the positive economic outlook looming ahead, and the fact that bond yields remained low also played an important role in maintaining stock market appreciation. It is worth mentioning that TGCC Group joined CSE by the end of the year, leading to a jump in its prices by 25% from the introduction on December 16 until December 31, 2021, thus exceeding the cumulative increase by the MASI since the beginning of 2021, with the highest traded volumes during several sessions.
Muscat Stock Exchange (MSX)- Pick up in economic activity
The Muscat Stock Exchange posted 12.9% annual gains, recording its first positive yearly performance since 2016. As is the case with its Gulf peers, Oman’s economic prospects are closely dependent on oil price movements, and this correlation is also visible in the country’s stock market performance. The pickup in the economic activity has positively impacted businesses and MSX-listed companies have registered a year-on-year increase, largely supported by financial and industrial sectors. In 2021, the Muscat Stock Exchange witnessed several fluctuations, in addition to several events during the last few months, including economic and geopolitical events affected by the fluctuations in oil prices.
The Egyptian Exchange (EGX)- A volatile performance
The Egyptian Exchange had a more volatile performance with an increase of 10.1% in its index over the year 2021, with initial public offerings (IPOs) on the Egyptian Exchange (EGX) amounted to EGP 7.95 billion, including three IPOs, two of which were private sector offerings, Taleem for Management Services and Emerald for Development and Project Management, along with one for public sector company e-Finance for financial and digital investments, the largest offering on the bourse, which topped the list of the largest offerings on the Egyptian Stock Exchange, with a value of LE 5.8 billion, exceeding the LE 5.2 billion offering of Telecom Egypt’s offering in 2005.
In addition, Egypt received in August the second tranche of the US$ 639 million AMF loan agreed in July 2020 as part of a structural adjustment facility in the public finance sector, which helped the country implement economic and financial reforms and strengthen its resilience to various challenges and the COVD-19 pandemic.
In parallel, EGX activity was somehow under pressure in March and April, on the back of the repercussions of a giant cargo ship accident in March, blocking Egypt’s Suez Canal and disrupting the navigation movement, in addition to a strong drop in Eastern Tobacco’s share price by 23.1% following the new bidding booklet, which was launched by Egypt’s Development Authority, for companies to apply for a new tobacco production license, bringing an end to decades-old monopoly by Eastern Company, not to mention the concerns over escalating regional tensions after the latest round of talks between Egypt, Ethiopia and Sudan over the Grand Renaissance Dam failed to make a progress and the Egyptian President warned of the risk of conflict over the giant dam in April. and mainly dragged by ex-dividend activity and some unfavorable company-specific factors.
Bahrain Bourse (BHB)- Driven by economic recovery plans
Bahrain Bourse’s positive performance has been in line with all the markets in the GCC reported gains during the year, driven by economic recovery plans, high vaccination rates, economic stimulus packages, and growth in oil prices. In fact, the rise in BASI by 20.6% in 2021 was mainly driven by the government’s significant economic recovery plans announced across multiple sectors, the continuous roll-out of economic stimulus packages by Tamkeen, Bahrain’s labor fund which has launched new programs aimed at developing high-potential sectors and creating job opportunities in the kingdom, in line with the National Economic Recovery Program, in addition to the relatively high vaccination rates, and long term fiscal reforms to narrow the fiscal deficit gap and achieve a fiscal balance with the doubling of VAT rates from 5% to 10% effective as of 2022.
Amman Stock Exchange (ASE)- Strong performance indicators
Amman Stock Exchange achieved positive indicators during 2021 with an increase of 27.8%, representing the highest annual gains achieved by the ASE since 2005. The improvement of the stock market’s performance indicators for this year was supported by the improvement of the listed companies’ performance indicators in terms of achieving a significant increase in their profits, in addition to the emergence of recovery indicators in the national economy and the improvement of its performance.
In addition, in order to enhance the technical infrastructure in the market and digital transformation, Amman Stock Exchange and Jordan Securities Commission launched the Electronic Disclosure System XBRL which provides the necessary information to investors in both Arabic and English languages. Also, the ASE launched the new trading system “Optiq” In March 2021 which was developed by Euronext, and it is implemented in the largest European stock exchanges, in addition to the launching of new features for mobile applications which enable investors to follow the trading live and direct and follow all information related to companies and their disclosures.