Gulf region is set to experience robust growth even if oil prices go sideways, according to the Global View investment outlook for the third quarter of 2011, released by asset management company Bank Sarasin.
Higher oil prices and accelerated government spending have helped economic growth in the Gulf region in the first half of 2011 despite uncertainties stemming from the political turmoil in parts of the region, the Swiss company with widespread operations in West Asia said.
Beyond the emerging markets, Bank Sarasin favours energy sector, based on its robust earnings, or otherwise recommends a defensive equities strategy.
Higher oil prices are desirable from a domestic point of view since increased public spending is needed to assure social coherence in parts of the region. But an increase in oil prices risks choking the global economy.
As per the Bank Sarasin's macro scenario, the global economy will cool somewhat in the next four quarters.
Major oil producers are, therefore, less likely to push too hard for higher prices as they understand the economic risks. A sideways trend in oil prices would still contribute to the region's robust GDP growth.
"A slightly lower oil price could even be positive for the sector since demand will increase if prices fall below USD 120 per barrel, reviving demand.
The energy sector alone shows positive earning momentum on a global basis, suggesting that energy sector will stand out in 2nd half of2011, when corporate earnings are forecast to fall, says Jan Amrit Poser, Head of Research and Chief Economist at Bank Sarasin.
Bank Sarasin forecasts that the decline in commodity prices and inflation concerns, as well as relatively strong growth rates in the remaining 2011, should have a positive impact on Asia stock markets.
Its Global View investment outlook for the third quarter 2011 which suggests the pace of global economic growth will continue to be slow, signals out emerging market equities like India as a ray of sunshine amid dark clouds.
It points to attractive opportunities in China in particular, and, after a time, in India.
The bank forecasts a 20% increase in emerging market corporate earnings in 2011, followed by an additional 10% in 2012, which is likely to be considerably higher than in the developed economies.