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Investors see limited room for stocks listed in Arab Gulf states to extend a world-beating rally as oil prices waver and the world economy slows over tight central bank policies.
The region, dominated by banks and energy firms, has benefited from rising interest rates and higher oil prices this year, as well as from US President Joe Biden’s meeting with Crown Prince Mohammed Bin Salman last month. But investors are now fretting over the drop in oil prices and risks to corporate earnings and global growth amid continued tightening by the Federal Reserve and other major central banks.
The MSCI GCC Countries Combined Index is up 7.9% this year after rebounding in July, compared with a 15% slump for the MSCI All-Country World Index. It posted the best month since January, outperforming other developing nations, and now trades at a 43% premium to the MSCI Emerging Markets Index, nearly three times the average premium over the past 10 years.
“Investors are still very cautious of how things go from here as in the global markets corporate earnings have been a mixed bag,” said Faisal Hasan, chief investment officer at Al Mal Capital. “This might lead to revision in estimates and hence valuations.”
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