GULF BOND, STOCK MARKETS LAG BEHIND, GIB SAYS

  Gulf money markets have grown reasonably
  well during the past decade, but bond and stock markets remain
  to a large extent fragmented and lag behind, &lt;Gulf
  International Bank BSC> (GIB) said.
      The bank's economist Henry Azzam said in a review of Gulf
  capital markets that investors have to relinquish traditional
  investment vehicles such as real estate, foreign currency bank
  accounts and precious metals.
      "Greater financial sophistication is needed coupled with
  more diversified capital market instruments and a change in the
  disclosure requirements on company accounts," he said.
      The GIB study reviewed capital markets under three
  categories -- money markets, stock and bond markets.
      Azzam said Gulf states had been making greater use of
  short-term money market instruments and banks in the region had
  floated various euronotes and underwriting facilities.
      "Nevertheless, bond and stock markets remain, to a large
  extent, fragmented and lagging behind," he said.
      Most debt in the region is still raised by syndicated loans
  and bank facilities and very few companies had made use of
  stock or bond issues. Only Kuwait has an official stock
  exchange, while other Gulf nations have yet to establish
  exchanges.
      But with dwindling financial surpluses in the Gulf,
  governments are actively pursuing ways to develop capital
  markets and set up domestic stock exchanges, Azzam said.
      He said recession stemming from sliding oil prices had
  "clearly had a negative impact on the development of capital
  markets in the region."
      In addition, family firms are reluctant to go public,
  financial awareness among investors is still lacking and
  investment analysis and corporate reporting standards lack
  depth. A sharp fall in share prices in the early 1980s prompted
  investors to hold on to shares hoping for an eventual recovery.
      Azzam said the absence of proper commercial law in some
  Gulf countries and authorities' apparent reluctance to adopt
  financial innovations had also hampered capital markets.
      He called for clearly defined laws governing incorporation
  of joint stock companies and the flotation of debt instruments.
      Azzam said capital market instruments should be made
  available to all citizens and institutions of Gulf Cooperation
  Council (GCC) states -- Bahrain, Kuwait, Qatar, Oman, Saudi
  Arabia and the United Arab Emirates (UAE). Some moves had been
  taken in this direction, with Bahrain allowing GCC nationals to
  own up to 25 pct of locally incorporated companies.
      Azzam said Gulf money markets had received greater depth
  from the introduction of treasury bill offerings in Bahrain and
  the expansion of securities repurchase regulations in Saudi
  Arabia.
      But he added there is "no bond market to speak of" in Saudi
  Arabia, Qatar, Oman or the UAE, with the last Saudi riyal
  denominated bond issued in 1978.
      While Bahrain plans an official stock exchange and trading
  in Saudi Arabia has picked up, establishment of formal
  exchanges in Qatar, Oman and the UAE does not appear imminent,
  Azzam said.
  

