Why You Should Invest in These Arab Economies

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Even in the best of times, the Arab World is not a place you’d normally think of as a red-hot investment opportunity.

Advertisement.

Yet, I bet you’d be surprised to learn that the Market Vectors Egypt ETF (EGPT) is the single-best-performing stock market in 2014 among the 46 global markets I track on a daily basis.

Given the political chaos in that country, investing in Egypt is clearly a contrarian call, much like, say, investing in Russia.

Yet, there is a group of Arab countries — the Gulf States — that are attracting investors’ attention because they are among the fastest growing and most successful economies in the world. In fact, the Gulf States collectively are the #4 ranked global markets in 2014 and are up 22.22% this year.

Advertisement.

No wonder that investor interest in the Gulf States is growing steadily.

In May, iShares launched the iShares MSCI Qatar Capped ETF (QAT) and the iShares MSCI UAE Capped ETF (UAE), the first single-country funds devoted to these red-hot stock markets, after they were upgraded from “frontier market” status.

And Saudi Arabia’s stock market also just surged to six-year highs, after the government announced that foreign investors will be allowed access by the middle of 2015.

Introduction to the ‘Gulf States’

Advertisement.

The Arabian Gulf States of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) make up the Cooperation Council for the Arab States of the Gulf — a political and economic union of Arab states bordering the Persian Gulf. Established in Abu Dhabi in 1981, they are still referred to as the Gulf Cooperation Council, or “GCC” states.

Exclusive  ETF Talk: One ‘CHIQ’ Worth Investing In

The Gulf States owe their initial economic success to winning the geographic lottery. A building and investment boom financed by decades of petroleum revenues has made some of these countries among the fastest growing and wealthiest in the world.

With a per capita gross domestic product (GDP) of around $100,000, Qatar is one of the five wealthiest countries on the planet, trailing only the European micro-states of Liechtenstein, Monaco and Luxembourg, and perhaps Norway.

According to the International Monetary Fund (IMF), growth rates in the Gulf States’ countries are set to remain strong in 2014, with Kuwait expected to grow at 3.1%, Qatar at 5.0% and the UAE at 3.6%. The Gulf States have also moved steadily up the ranks of the world’s most competitive economies, with both Qatar and the UAE now ranked in the top 20.

The Trust Fund Countries Make Their Mark

Advertisement.

Like a rich kid born into a wealthy family, the Gulf States’ biggest challenges are how not to waste all the money they are pumping out from the ground.

And to their credit, they have acted quite responsibly. The Gulf States have used their oil wealth to build up their sovereign wealth funds to hold close to $2 trillion of assets. The Abu Dhabi Investment Authority alone boasts over $900 billion in assets. Collectively, that’s more than what China dedicates to similar investments.

Qatar’s sovereign wealth fund, in particular, is making its presence felt around the world. In London, Qatar has purchased the department store Harrods; financed One Hyde Park, the world’s most expensive residential development; and was the primary investor in the Shard, Europe’s tallest skyscraper.

Exclusive  ETF Talk: One ‘CHIQ’ Worth Investing In

Buying Legitimacy in the Eyes of the World

Say the word “Dubai” to Europeans, and often you get the kind of sniffy response that you get when you say “Texas” or “California.” It is all too vast and new and “artificial” — as if bad plumbing in dilapidated London or Paris apartments were a sign of superior culture and breeding.

The Gulf States have worked hard to establish their credibility by becoming a hotspot for international events. Qatar submitted an unsuccessful application for the 2016 Summer Olympic Games. It was later chosen to host the 2022 FIFA World Cup — though as it turns out, not without a great deal of controversy. Dubai is also hosting the World Expo in 2020.

Advertisement.

The Gulf States also have focused on building Western-style educational and cultural institutions. Qatar hosts campuses of U.S. universities like Carnegie Mellon, Northwestern, Georgetown and Cornell Medical School. Neighboring Abu Dhabi is home to New York University and the Sorbonne. It even boasts its own version of the Louvre.

Dubai has established itself as an entertainment and shopping destination for Europeans eager to escape dark winters. On my recent travels, I saw that Eastern European discount airline Wizz Air recently set up direct flights between Budapest, Hungary, and Dubai to service the needs of both vacationers and guest workers.

How to Profit From the Boom in the Gulf States

While the political systems in the Gulf States are hardly the loud and vociferous democracies found in the United States and Europe, the Gulf States offer investors both political and economic stability. There was no “Arab Spring” in the Gulf. Both the UAE and Qatar peg their currencies to the U.S. dollar, while Kuwait pegs its currency to a basket of currencies, also heavily weighted towards the greenback. As a result, currencies have remained stable even as many emerging market currencies have tumbled.

Exclusive  ETF Talk: One ‘CHIQ’ Worth Investing In

The Market Vectors Gulf States Index ETF (MES), also a current recommendation in my Alpha Investor Letter newsletter, tracks the Market Vectors gross domestic product (GDP) GCC Index, which in turn follows the performance of the largest and most liquid companies in the Gulf Cooperation Council.

In case you missed it, I encourage you to read my e-letter column from last week about what market sentiment is telling us now. I also invite you to comment in the space provided below.

share on:

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE