CAIRO, Feb 1: Some Arab stock markets have experts wondering whether they'll ever live up to their promise, others offer little or no access and the rest are Just plain insignificant.

Political uncertainties, slow reforms and a tendency to keep Lhe best in state hands are Just some of the problems which have so far stood between Arab markets and a larger share of the funds pouring into emerging markets elsewhere in the world.

But experts have high expectations of better times. One reason for optimism is the peace talks Israel and Syria launched in December. An Israeli-Syrian peace treaty would likely yield one between Israel and Syrian protege Lebanon. A broad-based regional settlement, the experts say, will end years of political instability and allow governments to turn more of their attention to shoring up their economies.

"We think that agreement between Syria and Israel will give a very big boost to the region. with Lebanon as well as Egypt the largest beneficiaries," said Dan Lubash. a Merrill Lynch managing director In London.

The Egyptian market, whose 1999 gains stood at more than 60 per cent, has since the mid-1999s been viewed favorably because of Its c heap prices and the country's macroeconomic successes. Bui the continuing absence of a Huai Middle East settlement, a rigid foreign ex-.change regime, a currency

thought to be overvalued and a slow moving privatisation program have taken much of the shine off the Egyptian market.

Egypt's market, where trading is dominated by cellular telephone provider Mobinil and a single bank, places negligible restrictions on foreign investments.

"One of our biggest disappointments In the region Is Egypt,” said Alexander Kazbegi, an emerging markets expert with investment bankers Salomon Smith Barney in London. "It has stayed promising for far too long."

Fewer than half the more than 300 companies targeted for privatisation in the mid-1990s have been sold off. Kazbegi says a devaluation of the Egyptian pound, which would cut into the profits of foreign Investors, has long been overaue.

Lebanon's tiny market has gone downhill since the 1998 departure of prime minister and billionaire businessman Rafik Hariri, shedding more than 20 per cent of its value last year. A sharp drop In economic growth from the highs of the mid-1990s. a gaping budget deficit and Lhe stalemate In regional peacekeeping have contributed to the downward trend.

The Beirut stock exchange, which is open to foreign investors, reopened in 1996 after a 13-year closure forced by a 1976-1990 civil war. It is dominated by Solldere, the company entrusted with the reconstruction of the Lebanese capital's

war-ravaged downtown.

In Jordan, officials are not sitting idly by waiting for a Middle East settlement to improve the investment climate. Jordan in January sold 40 per cent of its stake in the country's telecommunications monopoly to France Telecom.

Ismail HaJJaJ. who heads the Jordanian market's research department, says more selloffs are planned. But, he pointed out. high Interest rates were hurling the market by pushing local investors to the security of bank deposits.

"Our hope for a better year depends on progress In the Middle East peace process, stability In the region and domestic reforms," HaJJaJ said.

Jordan’s own 1994 peace accord with the Jewish state has failed to produce an economic dividend, in part because of Israel's reluctance to ease restrictions on Jordan's trade with the 2.8 million Palestinians llvlrig in the West Bank and Gaza.

Amman's market Is dominated by two banks — the Arab Bank and the Housing Bank — and industrial companies that export to sanctions-hlt Iraq. The market is open to foreign Investors.

In Saudi Arabia, whose $62 billion market Is by far the largest in the Arab world in terms of capitalisation, foreign investors are restricted to only one of 11 mutual funds.

But there are plans to make available to non-Saudis Global Deposi to Receipts in the Saudi Telecommunications Company and petrochemicals giant Saudi basic Industries Group — both salted for partial privatisation later this year. The GDRs will be available on international markets.

Shares on the Saudi market, which is dominated by banks, appreciated by 43 per cent in 1999.

Saudi Arabia is the world s largest oil exporter and producer. The recent sharp rise in oil prices has gone a long way in remedying its fiscal woes and led economists to predict a slowdown in Its drive for reform.

"It is interesting and large, but on the other hand, a lot of steps separate what is a large and Interesting market and what is a real market." Salomon Smith Barney's Kazbegi said of the Saudi market, whose average weekly trade stands at about $760 million.

The inaccessibility of the Saudi market is mirrored In Kuwait, where only citizens of the six-nation Gulf Cooperation Council — Saudi Arabia. Qatar. United Arab Emirates. Oman. Bahrain and Kuwait — can directly invest in a market dominated by banks.

Unlike the Saudi market, shares in Kuwait have been steadily slipping in recent months. Financial analyst Izzat al-Ghabra predicts they will continue to falter In 2000 because of expected poor corpo^ rate results, reduced government spending and lack of liquidity.