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Capital Markets

Covid-19 could be good for Gulf equities

Coronavirus could provide the ‘ultimate accelerator’ for privatizations and foreign involvement.

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Trading volumes at the Abu Dhabi Securities Exchange (ADX) fell by over a quarter in the first half of 2020 as the coronavirus pandemic hit activity. However, a listing from national energy company Taqa and several initiatives to encourage new listings could revive a lacklustre equity market.

Indeed, with lower income from oil sales and a weaker global economy, many Gulf governments are expected to raise funds by privatizing or consolidating some of their high-quality assets, much as Saudi Arabia did with Saudi Aramco last year. And Covid-19 could well be the catalyst for action sooner rather than later.

“There is definitely a case to be made that Covid is the ultimate accelerator,” says Hootan Yazhari, head of Middle East and North Africa equity research at Bank of America.

“It could force a lot of things that were expected to happen into a shorter time frame. Some privatizations could be accelerated, and we’ll see a further opening up of investment, for example allowing foreigners to take majority stakes in companies in the region.”

Volume struggle

Gulf equity markets have struggled to attract the attention of international investors for some time, and the sharp decline in volumes was inevitable in the wake of the Covid-19 pandemic.


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