"A number of MENA stock markets will continue to be strong," Beltone Financials predicts for 2011 in a report entitled "The Arab Stock Markets Review" published on Tuesday.

The report names Egypt, Saudi Arabia and Qatar as the most promising markets in the region. 

Factors like a liquid banking sector, strong intrinsic demand in 2011 and ever burgeoning infrastructure programmes form the backbone of booming stock markets.

For Saudi Arabia, widespread infrastructure spending underpins the good prognosis while for Egypt it is Initial Public Offerings. Qatar benefits from fast development of its own infrastructure, which was given a positive kick late in 2010 when it won the right to host the 2022 FIFA World Cup.

Kuwait, despite boasting higher government revenues, has bleaker prospects on account of its dysfunctional political scene.

Qatar, Saudi Arabia and Egypt will continue to build from their position as the top performers in the region. For the coming year, the growth indices in these three states is expected to rise, on average, by around 12 per cent. This is based on earnings growth and continuing flows into the markets from local and foreign investors, Beltone commented.  

Banking, the motivating sector of all sectors attracting foreign investors in Egypt, is projected to have high profitability rates, because of low penetration levels in several markets allowing for general growth.

Investment potential is highlighted in many economies: "We expect Egypt, Qatar and Lebanon to continue outperforming the region in terms of balance sheet growth," the report reads.

The MENA region's construction sector remains promising, given the large infrastructure budgets, estimated be around $820 billion for the next five years.  

"Favorable demographics have significance in Egypt," Beltone stated predicting real estate demand to reach around 600,000 units per annum over the next five years. Population growth, rural–urban immigration and investors from the GCC region ensure the demand for and price of property will continue to rise.

The report mentioned that the "strong demand" for consumer goods will "continue in 2011 to rise in four of our top picks."

The telecommunication sector will suffer from its own success; growth in mobile subscription is set to slow due to the high present levels. But the sector's growth in 2011 will be driven by the additional revenue from the data services.

As well as Kuwait, some markets are predicted to shrink in 2011. Lebanon continues to be affected by uncertainty in the wake of Hezbollah's threats against the government, harming local investor sentiment. High unemployment and subsequent volatility will stymie Tunisia's economy while Dubai is held back by high debt repayments.

Egypt's retail sector is expected to attract more foreign direct investment in 2011, with earnings growth set to reach 22 per cent. Credit growth, in both private and household sectors, is expected to continue to recover at the current pace.