Foreign investors become net sellers across GCC markets

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Foreign investors switched gears in the final quarter of 2023, becoming net sellers of stocks across GCC markets for the first time in 14 quarters.

According to analysis by Kuwait-based Kamco Invest, the shift comes after a sustained period of buying by foreign investors, who were net buyers for the previous 14 quarters dating back to Q1 2020. Net sales in Q4 2023 totalled $1.3 billion, compared to net buying of $1.6bn in Q3 2023.

Market observers attributed the change to a confluence of factors, including regional market trends, initial public offerings (IPOs), geopolitical tensions, individual countries’ economic health, and crude oil prices.

Saudi Arabia stands out as foreign investors remain buyers: While the overall trend shifted towards net selling by foreigners, Saudi Arabia bucked the trend. The Saudi exchange saw continued buying from foreign investors, with net purchases reaching $640.3m in Q4, partially offsetting the regional decline.

Abu Dhabi leads in foreign selling: Foreign investors offloaded the most stocks in Abu Dhabi, with net sales reaching $975.4m in Q4, a significant increase from net buying of $462.5m in the previous quarter. Other GCC markets, including Dubai ($98.5m) and Kuwait ($81.6m), also witnessed net selling by foreigners in Q4.

Historical context: Strong foreign buying prior to Q4 shift: Looking at the broader picture, foreign investor activity in GCC markets has been largely positive over the past five years, with only two quarters registering net selling. The peak buying period occurred in Q1 2022, with net purchases reaching a staggering $11bn, driven primarily by strong inflows into Saudi Arabia and Qatar.

Despite the shift in Q4, foreign investors remained net buyers for the full year 2023, with net purchases of $2bn. However, this figure pales in comparison to the $20bn net buying recorded in 2022, representing a year-on-year decline of nearly 90pc.

GCC investors step up activity: While foreign investors took a step back, GCC investors in other GCC exchanges demonstrated increased buying activity in 2023. Net purchases by GCC investors reached $140m, compared to net selling of $360m in 2022.

Qatar led the way for GCC investors, with net buying of $424m in 2023, followed by Saudi Arabia ($325.1m) and the UAE exchanges ($176.8m).

Trading activity sees mixed results: Overall trading volume across GCC markets declined in 2023 by 9.2pc to 237.3bn shares compared to 261.4bn shares in 2022. Dubai was the standout performer, experiencing a 26.2pc increase in trading volume to reach 47.8bn shares, while Saudi Arabia also saw a healthy rise of 16.6pc to record 50.7bn shares.

The picture for trading value was more mixed. While Dubai and Oman witnessed growth, the rest of the GCC markets saw declines. The aggregate value traded during the year reached $526.6bn, down from $686bn in 2022. Dubai again led the way in terms of percentage growth, with the value traded increasing by 4.9pc to $26bn.