GCC investors optimistic over bright Saudi outlook

PHOTO

Investors across the GCC expect cash deposit returns of above 3 per cent this year as against less than 3pc in 2021, a new survey has found.

Conducted by Bahrain-based SICO, the second annual investor return assessment survey however found that inflation remains the key concern for the next 12 months.

The regional asset manager, broker, market maker, and investment bank has published the results in the GCC Report, Mapping Investor Expectations and Regional Outlook which concluded that investors are generally optimistic about the economic outlook of Saudi Arabia and the UAE while being broadly neutral on other countries such as Kuwait, Bahrain, and Oman.

Respondents picked private equity as the asset class requiring the highest returns, at 14pc, reflecting its significance to investors, despite the higher risk associated with it compared to other asset classes.

With regards to 10-year USD government bonds, required returns in Saudi Arabia, the UAE and Kuwait, stood between 3-5pc annually. While the majority of respondents maintained their annual return expectations in their 2022 responses at a similar level to 2021 for Oman and Bahrain between 6-8pc, a considerable number of investors this year also expect higher returns of between 9-11% for this asset class.

Within income-generating real estate, investors required 9-11pc in the UAE – the highest across GCC markets – while investors required a lower return of 6-8pc in Kuwait, Bahrain, and Saudi Arabia.

Return requirements for listed equities increased to 9-11pc in Saudi Arabia and the UAE from 6-8pc last year.

Similarly, higher return expectations are trending for the other GCC markets as well.

In its second year running, the online survey commenced this year in September and compiled data from C-Suite executives, investment and fund managers, business owners, and institutional investors representing a diverse mix of GCC enterprises, multinational companies, listed and private companies, 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, and cash deposits for all six countries in the GCC.

The survey also touched on the issues which are currently of the most concern to investors.

Commenting on the findings, SICO chief executive Najla Al Shirawi said, “The results confirmed our insights and provided a basis for us to develop suitable products and investment opportunities in line with investor expectations that can deliver positive returns for our clients, as we’ve consistently done throughout the years.

“This year has been challenging globally, but we see the GCC faring better than most regions.

A positive economic outlook for Saudi Arabia and the UAE and a neutral one for Bahrain are great news for us, as we strengthen our foundation as a leading player in Bahrain and grow our business in both Saudi Arabia through our recently acquired subsidiary, SICO Capital, a full-fledged investment bank, and our subsidiary, SICO Financial Brokerage, in the UAE.”

In 2022, economic performance in GCC countries was cushioned by government reforms, fiscal surplus, relatively higher oil prices, diversification of the economy, and a strong non-oil momentum, which led to less inflationary pressures compared to global peers.