U.S. Markets closed

While investors flee emerging markets, the Middle East and North Africa are emerging as oases

Nandagopal J. Nair

Equity markets in the Middle East and North Africa (MENA) are emerging as a hotspot for international investors. The region attracted $655 million of inflows in May—the highest monthly inflows over the past five years, according to Deutsche Bank. Year-to-date, the MENA markets have seen net inflows of $2.3 billion against an outflow of $192 million during the same period in 2012.

The surge in inflows into the region comes against the backdrop of foreign investors leaving emerging markets in droves. Over $3 billion was pulled out of emerging market equity funds in May, the highest since end-2011. The rout intensified in June (paywall), with almost $12 billion already redeemed so far this month. The Morgan Stanley Capital International (MSCI) emerging-market index is down close to 10% this year.

But indices in Dubai and Abu Dhabi have rallied by around 40%. Why the boost? Probably improving economic fundamentals, and an MSCI upgrade for UAE and Qatar.

More from Quartz