- Investors maintain a positive economic outlook for Saudi Arabia, the UAE, and Qatar over the coming 12 months.
SICO BSC (c), a leading regional asset manager, broker, market maker, and investment bank licensed as a conventional wholesale bank by the Central Bank of Bahrain “CBB”, published its third annual investor return assessment survey, offering an inside look into the economic and return requirements of investors across the GCC.
The online survey kicked off in September this year, compiling data from C-Suite executives, investment and fund managers, business owners, and institutional investors representing a diverse mix of GCC enterprises, multinational companies (both listed and private), and government entities. The survey sought responses on the overall economic outlook and minimum unleveraged return requirements for various asset classes, including listed equities, government bonds, real estate, private equity, cash deposits and cryptocurrency for all six countries in the GCC. The survey also touched on the issues which are currently of the most concern to investors. This year, the survey gathered diverse viewpoints from 190 respondents across the GCC.
SICO’s CEO, Najla Al-Shirawi, commented on the report publication, saying, “As we tread through a period of global inflationary pressures and interest rate hikes, investors across the GCC are recalibrating their strategies. It is imperative that we continue to use the information we have accumulated to expertly assess these changing trends over time, linking it to economic indicators and ultimately translating it to investment products and solutions aligned with investor preferences and trends. We anticipate that the results of this report will serve as a tool for predicting expected returns and optimal valuation of any new offerings in both public and private markets.”
Based on the respondents’ expectation for listed equities, the range of returns required for Saudi Arabia, the UAE, and Qatar remained between 9-12% for 2024 versus 9-11% for 2023, while for Kuwait, Oman, and Bahrain’s return requirements moved significantly higher to range from 9-12% compared to 6-8% in the prior year.
Within income-generating real estate, spanning the diverse economies of all GCC countries, the required returns for real estate investments have been observed to range between 7-10%. Meanwhile, investors require cash deposit returns between 5-6% across the GCC. Private equity remained the asset class requiring the highest returns, at or above 16% for all GCC countries except for Qatar.
With regards to 10-year USD government bonds, required returns for GCC countries range from 5-7%, with investors requiring the highest return in Bahrain at 7%. Required return expectations are higher in Saudi Arabia, the UAE, and Kuwait this year relative to last year. More than 30% of respondents indicated a requirement of a 6% return in Saudi Arabia, the UAE, and Kuwait in this year’s survey.
The survey also concluded that market participants remain broadly optimistic of Saudi Arabia, the UAE, and Qatar, while the positive sentiment in Oman has increased this year. Participants are largely neutral for Kuwait, Bahrain, and Oman.
Inflation remains the biggest concern across all GCC countries, followed by interest rates and recession. Logically, the three are interconnected, as inflation risks would imply higher rates for a longer period which could stifle growth and capex within the region triggering recession.
To read the Investor Return Requirements in the GCC Report 2024, please visit sicobank.com.
SICO is a leading regional asset manager, broker, market maker and investment bank, with USD 5.8 bn in assets under management (AUM). Today SICO operates under a wholesale banking licence from the Central Bank of Bahrain and also oversees three wholly owned subsidiaries: an Abu Dhabi-based brokerage firm, SICO Financial Brokerage, a specialised regional custody house, SICO Fund Services Company (SFS), and SICO Capital, a Saudi-based investment banking company. Headquartered in the Kingdom of Bahrain with a growing regional and international presence, SICO has a well-established track record as a trusted regional bank offering a comprehensive suite of financial solutions, including asset management, brokerage, investment banking, and market making, backed by a robust and experienced research team that provides regional insight and analysis of more than 90 percent of the region’s major equities. Since inception in 1995, SICO has consistently outperformed the market and developed a solid base of institutional clients. Going forward, the bank’s continued growth will be guided by its commitments to strong corporate governance and developing trusting relationships with its clients. The bank will also continue to invest in its information technology capabilities and the human capital of its 150 exceptional employees.