Timing the key for Gulf's equity markets | ZAWYA MENA Edition

Timing the key for Gulf's equity markets | ZAWYA MENA Edition:

GCC markets have gotten off to a strong start in 2019 led by the market in Saudi Arabia, which is up approximately 8 percent  year-to-date (YTD). The recent rally on the Tadawul Index has been led mainly by foreign investors, who bought close to 4.4bn riyals ($1.17 billion) through QFIs and Swaps during the first month of the year in anticipation of inflows that will come from FTSE and MSCI inclusion in March and June respectively.

The positive sentiment on KSA can also be attributed to other factors, such as recent news on government mega-projects like NEOM, the kingdom’s under-development $500bn futuristic mega-city, and the National Industrial Development and Logistics Program (NIDLP), which aims to drive $450bn in new investments. A 21 percent YTD gain in the Brent crude price has also supported the momentum, resulting in a further upswing in market sentiment.

Leading the rally is the Saudi banking sector, which continued its strong performance up 31 percent in 2018, versus an index average of 8.3 percent, and up 12 percent YTD vs. an index average of 8 percent. While the market is not cheap, we are of the belief that one cannot forego the opportunity, given its weight on the benchmark S&P Index.