From parliamentary gridlock in Kuwait to paralyzed debt talks in Lebanon and giddy valuations for Saudi Arabian stocks, investors in the Middle East face a raft of risks in the fourth quarter.
Ever-present is the fact that current crude prices can’t balance the budgets of most of the region’s energy exporters.
Here are six risks to watch in the last three months of the year:
Oil Blow
While derivative traders have pared bets that Gulf states will be forced to devalue their currency pegs in the next 12 months, bouts of volatility may return.
Countries that have been financing deficits through debt sales “may be in trouble if oil prices persist at current levels,” said Peter Kisler, a London-based portfolio manager at hedge fund North Asset Management. “2020 is an exceptional year, and they can get away with it now, but I am not sure they have a viable long-term plan if oil prices don’t return to pre-2020 levels.”
Debt sales from the region hit a record in the past quarter as governments rushed to place bonds after the coronavirus shock.
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