Egyptian, Saudi markets show high potential, expect more investments

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Emerging markets (EM) have been associated with high positive expectations globally, which are backed by a higher growth and attractive equities.

Given the economic reforms in MENA, especially in both Saudi Arabia and Egypt, these emerging markets have begun to receive the attention of investors worldwide, according to a research paper co-authored by the UAE Emirates NBD Asset Management and the UK’s Jupiter Asset Management.

“Looking at EMs from the bottom-up, there are plenty of stocks that offer compelling long-term return potential, especially within travel and tourism, financials, and technology,” Ross Teverson, head of strategy – emerging markets at Jupiter Asset Management, commented.

Following the inclusion in MSCI EM Index, the Tadawul All Shares Index (TASI) grew, rising up 15% year-to-date (YTD), which reflect this step’s energising effect on the Saudi market.

Additionally, the socio-economic changes carried out in Saudi Arabia, including decision permitting women to drive for the first time in the Kingdom and the building of new cinemas, carrying a great potential for new investments in the Saudi Market, the paper reported.

“A great deal more can be achieved through [the Saudi] stock market, especially after inclusion on the FTSE Russell and MSCI EM indices,” senior executive officer at Emirates NBD Asset Management Salman Bajwa said.

However, investors should be cautious and selective when choosing the sectors in which they would inject their funds, Bajwa added.

The recent reformations in the biggest Arab economy and the inclusion in the EM index are expected to boost healthcare, consumer, and insurance sectors, the top official revealed.

With a range of economic reforms and improvement in both inflation and international reserves figures, Egypt’s economy is stable and is expected to achieve higher growth in the coming 12-18 months, the paper found.

Furthermore, the Egyptian Exchange (EGX) is expected to see better performance in the coming period, given the current plans to achieve gas self-sufficiency and the market’s positive outlook.

“However, investing in Egyptian stocks is not without risk, as rising oil prices are likely to create upside pressure on inflation. A further sharp devaluation of the EGP will negatively impact USD-based returns, while escalated geopolitical risk may hamper investor sentiment,” Bajwa continued.

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