World’s Youngest Emerging Market Sees Equity Dream Wilt Away - Bloomberg

World’s Youngest Emerging Market Sees Equity Dream Wilt Away - Bloomberg:

The stimulus-driven “everything rally” has sidestepped Saudi Arabian stocks.

The world’s seventh-biggest equity market is underperforming its emerging-market peers by a factor of one to seven as investors fret over the oil-dependent kingdom’s growth outlook. They’re betting the government’s tax increases and cuts to worker allowances will crimp consumer demand and cause the deepest recession since 1987.

A year since Saudi Arabia’s upgrade to an emerging market in MSCI Inc.’s indexes, the coronavirus and crude-market turmoil are forcing a painful fiscal adjustment. That’s threatening corporate earnings and the nation’s investment case.

“Weaker consumption and private capex, and fiscal austerity, render the profit outlook bleak,” said Tarek Fadlallah, the chief executive officer of the Middle East unit of Nomura Asset Management. “Economic recovery will be more difficult as output is lost from firms that will shutter over the coming months and as government revenues remain under strain.”