Morgan Stanley analysts expect $82 billion of foreign money to flow into Middle Eastern equities as the region continues to sharply outperform international share markets this year.
Flows are set to pick up as global emerging-market funds increase their exposure to the region and as its weighting increases in MSCI Inc.’s gauge of developing-nation stocks, a team of analysts and strategists including Marina Zavolock wrote in a note.
Shares listed in the Persian Gulf have surged this year, tracking commodity prices and rising rates to top most major gauges in the world. Morgan Stanley turned overweight on Qatar as they see the country benefiting from a tight gas market and the 2022 World Cup, which it hosts later this year. The analysts are also overweight on Saudi Arabia, the United Arab Emirates and Kuwait.
There are “fundamental, structural, and technical reasons we expect Middle East equities to continue to outperform,” including higher energy prices and ongoing reforms, they wrote. It’s now their most preferred pick within the eastern Europe, Middle East and Africa region.
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