Flip through the latest issue of Gulf Weekly.
Asian stock markets and economies can escape the worst of the global downturn, with China, Hong Kong and Taiwan best placed to ride through the turbulence, says Morgan Stanley in a note.
So too could the GCC countries, who, industry insiders and analysts predict, would see a rally sometime next year.
The consensus of the Meed Capital Markets 2008 conference held in Dubai was that global capital markets will continue to deteriorate, but GCC capital markets will recover earlier and decline by less, with a rally next year.
That said the outlook for local initial public offerings appears particularly poor, except in Saudi Arabia where IPOs are mainly a way of distributing money to nationals, and foreigners cannot participate.
As regards Asia, its fundamentals are strong, analysts Malcolm Wood, Ryan Tsai and Corey Ng write in the Morgan Stanley note. "A combination of easier monetary and fiscal policy and lower commodity prices should enable Asia to avoid the worst of the global downturn."
China and Japan have slashed borrowing costs in the past two weeks to ease the economic fallout from the global credit crunch that is pushing some countries into a recession.
The turmoil, which caused the collapse of Lehman Brothers Holdings, has frozen credit markets and triggered a worldwide rout for equities, wiping out more than $25 trillion of market value this year.
"If the worst of the global liquidity crisis is behind us, macro strength is probably going to become a key market driver," the report says. "This should favour Greater China. A key difference between Asia today and in 1997-98 is the emergence of China as a key driver of growth."
In this scenario, from the capital markets' perspective the question is when the GCC might 'decouple' from the collapsing stock markets of the world.
There is no doubt that recent tumbling local stock markets were entirely correlated to global trends.
John H Burbank III of the US hedge fund Passport Capital, which owns 5 per cent of Egyptian investment bank EFG Hermes, says regional stocks were selling very cheaply and reflected modest profit forecasts, whereas for US stocks 'prices are still liars' as profit forecasts for 2009 remain too high.
Marios Maratheftis, regional research head at Standard Chartered Bank, lists the strengths of the GCC economies citing: Diversification and ongoing investment in infrastructure; a budget surplus to ensure projects continue in 2009 during a time of global de-leveraging; and a proactive policy response as net exports drop, with counter cyclical government spending.
Indeed, it is this ability to maintain spending when other countries are either forced to cut back or go deeply into debt to maintain spending that puts the GCC countries at such an advantage.
They can invest in their infrastructure during a global recession - when costs are likely to be significantly cheaper than in recent times - and then be very well placed to cash in on the recovery phase when it comes later.
It is also worth remembering that there has never been a global recession that has not been followed by a recovery.
All the same, the immediate outlook for GCC capital markets does not look good as the global markets try to find a bottom.
Uto Baader the chairman and founder of Baader Bank, a German-based securities trading company that commands one third of the trading volumes at seven German stock exchanges says he had never experienced anything like the panic of recent weeks in his long career but thought global markets had not more than 15 per cent-20 per cent to fall to reach the bottom.
Therefore, valuations in the GCC bourses are at its lowest and there is enough scope for them to bounce back as some of the regional central banks have cut interest rates, says Global Investment House (GIH).
Due to the global credit crunch and the resultant panic selling across the Gulf, valuations are at rock bottom, GIH says in its report 'GCC Stock Market Valuations: Is this the Bottom?'
"We might see a positive change forthcoming after the reduction in the discount rates by some of the central banks in the region and injection of liquidity into the financial system," it says.
GIH says it expected the regional economies to mirror the latest US Federal Reserve's rate cut as a result of the dollar peg. Also, the robust nine-month results should provide sufficient short term catalyst to the comeback of the markets.
