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There has been a marked fall in confidence amongst international and regional investors towards the GCC, as seen by a 10.5 point drop in the GCC Index, says the July 2009 GCC Investor Sentiment Report of Shuaa Capital.
Much of the decline in the GCC Index can be attributed to this month's significant fall in sentiment towards the current state of economic conditions.
As expected, the biggest decline in investor confidence has been towards the UAE.
"The UAE Investor Confidence Index lost most of June's gains and fell from 123.8 to 113.9 points," the Shuaa report says.
Oman, this month's only gainer in the region has now overtaken the UAE's index and is now ranked third in the GCC, hitting 119.2 points.
All other GCC countries saw a decline of between two per cent and five per cent in their indices.
However, Qatar and Saudi Arabia still command the highest level of investor confidence with their indices at 137.5 and 135.8 points respectively.
Kuwait's index is still the weakest in the region, and has actually dropped back below the 100-point mark this month, to 98.3 points. Bahrain's index declined 2.7 points to 107.1.
Shuaa Capital sees the current market perception driving much of decline.
The significant slide in the GCC index was primarily driven by a 31.9 per cent fall to minus 15 per cent in the balance of investors' perceptions of current regional economic conditions.
The UAE (minus 45 per cent) and Kuwait (minus 50 per cent) were the main contributors to this month's worsening perceptions of GCC's current economic conditions.
On the contrary, Qatar's economy is perceived to be most the robust, as investors are much more positive on the economy's current condition, recording a balance this month of 20 per cent.
Bahrain saw only 6.7 per cent of investors positive on the economy, while due to a significantly high number of neutral responses (48.3 per cent), the balance was minus 26.7 per cent.
Despite the declines, Shuaa Capital states investor confidence for GCC economies remains strong.
Meanwhile, the six-month investor outlook for the GCC economies, with a balance of 53.3 per cent, is lower than last month's 65.2 per cent.
Despite the 11.8 per cent loss for the GCC, the six-month economic outlook for the region compares favourably with both Bric countries and global emerging markets, both recording slightly higher figures of 56.7 per cent and 55 per cent.
Much of this 11.8 per cent drop can be attributed to the UAE, which remained positive, but lost 15 per cent of its balance, slipping to 36.7 per cent.
Nearly all other GCC markets saw little change on investors' six-month outlook, with Saudi Arabia (58.3 per cent) and Qatar (58.3 per cent) jointly leading the way.
Oman (40 per cent) was the only country to see much movement on last month, gaining 8.5 per cent to 40 per cent. Bahrain (30 per cent), Kuwait (23.3 per cent) made up the rest of the region.
The report also highlights that the UAE stock markets continue to be perceived as most undervalued. Stock markets across most of the GCC remain undervalued in the eyes of investors, although not to the extent of last month.
Once again, it is the UAE stock markets leading the way, with the Abu Dhabi Stock Exchange and the Nasdaq Dubai seen to offer the best opportunities for returns according to investors, with both exchanges 26.7 per cent undervalued on balance. This is despite a 12.7 per cent decrease on last month's response for Abu Dhabi.
Kuwait has seen a dramatic drop in investor sentiment towards its local stock market, falling 15.6 per cent on balance to minus 10 per cent indicating that overall, investors feel the stock market is actually overvalued.
Bahrain (3.3 per cent), Oman (11.7 per cent) and Qatar (20 per cent) saw minor falls of 6.8 per cent, 2.9 per cent and 4.7 per cent respectively, while the other Dubai market, the DFM, remained nearly unchanged with just a 0.3 per cent gain to 21.7 per cent.
Investors have retained their positive six-month outlook for regional stock markets, especially for the Saudi Arabian, Qatari and the UAE stock markets, which saw gains in between 5.6 per cent and 16.5 per cent.
The Tadawul is expected to perform the best, with 56.7 per cent on balance expecting it to rise. This is closely followed by the Doha Stock Market (51.7 per cent) and the Abu Dhabi Securities Exchange (46.7 per cent).
Other regional markets are also looking positive, with the DFM (36.7 per cent), Kuwait Stock Exchange (30 per cent) and Oman Stock Exchange (31.7 per cent) all with balance figures in the 30s.
The Bahrain Stock Exchange is also looking relatively strong with 21.7 per cent, believing the performance of the stock exchange will improve by the end of the year.
While GCC stock markets are expected to see greater gains over the next six months than Western markets, survey respondents have been increasingly positive towards them in July.
