Are Gulf Financial Markets Heading for a New Boom Despite Fluctuation?

The terms “bullish” market, “bullish” market and “bearish” market describe bullish and bearish market trends, and the names probably correspond to the fact that the bull attacks by raising its horns upwards, while the bear claws downwards. Economists are a bear market that falls 20 percent or more than a major stock index, such as the S&P 500 or the Dow Jones Industrial Average, over a sustained period. As for the term “bull” market, it reflects a bull market when securities are on the rise, while a bear market occurs when securities fall for an extended period of time, and the question is whether the Gulf markets were in a “bear state” in the first 10 months of the year ” ” or “bullish” position? Although geopolitical consequences, the most recent of which is the Russian-Ukrainian war and the economic recession affecting the world’s major economies, have affected the performance of Gulf financial markets based on many considerations, above which the existing system, globalization and the correlation of Gulf currencies with the US dollar (with with the exception of Kuwait, which is a basket of currencies, although the dollar dominates). ), and raising Gulf interest rates according to the US Federal Reserve raising interest rates to reduce inflation and curb prices, not to mention the connections between energy, food, trade, logistics, financial markets and others in the region with the world.

Questions we asked financial analysts and economists to track the performance of Gulf financial markets since the start of this year and their expectations for that performance with two months to go from the start of the new year and their expectations for this performance in light of the many political and economic challenges facing the world it is evidenced today, although the rise in energy prices is in addition to government initiatives. Regional and increased foreign investment protected the region from global economic troubles and contributed to the growth of its market activity.

Quality inserts generated good liquidity

A member of the National Advisory Board at the Chartered Institute of Securities and Investments, Waddah Al-Taha, said that the performance of the Gulf markets was generally good in 2022, and that they were better than many markets in the world, including the US markets. , which have clearly declined since the beginning of the year, although they have reduced their losses, but because of this they are still suffering losses since the beginning of the year, and Al-Taha added that optimism contributed to this positive shift about the rise in oil prices and thus the increase in government revenues and the creation of surpluses that have achieved stability, and can later generate growth in consumption, which is a positive factor for the markets as well. As for the second factor, which is very important, according to Al-Taha, it is related to quotations on the Gulf markets, as which were in Saudi Arabia, Abu Dhabi and Dubai, and they were qualitative and generated very good liquidity, and I believe that I outperformed the Gulf market, although Taha believes that there may be a little exaggeration in the upswings, but the performance is generally positive.

Al-Taha continued: “In my opinion, part of this positivity is not only from the quotations, because the results of the companies were good, among which were primarily the results of the banks that benefited from the interest rates, but this benefit, in my opinion, it’s hard to sustain, as continuing to raise interest rates could reduce appetite.” Borrowing, especially in the rest of the year, and interest rates could be raised again or twice in the future by the US central bank to reach levels close to five percent.. Perhaps a decline in profits, not only as a result of higher interest rates, but in general our markets may be psychologically affected by the decline that the US market may witness during the rest of this year.

The first dual list of Saudi Arabia and the Emirates

A member of the National Advisory Board at the Chartered Institute of Securities and Investments continued: “In general, the continuation of qualitative listings such as the (Americana) listing, which will take place by mid-November, is the first dual listing between the Saudi market and the Abu Dhabi market, and the first dual listing between markets.” Saudi and Emirati markets, and the first of its kind on the Saudi “Tadawul” market, i.e. registration of shares listed on the Gulf market. stock market or another, so all are positive developments. Al-Taha felt that it would be very difficult if the situation continued in this way, i.e. raising interest and reducing the US markets, to resist such pressures on the Gulf markets, pointing to an important point presented in the complex effect on the Gulf budgets that resulted from of the rise in oil prices and the appreciation of the dollar, which was reflected in Gulf currencies, saying that this compounded increase benefited the oil-producing countries, but greatly harmed the consuming countries.

The performance of Gulf financial markets

For his part, Muhammad Ali Yassin, an expert on financial markets, said that the Gulf markets have been on the rise since the beginning of this year, adding that the Gulf markets are one of the best-performing markets in the world, especially developing ones, and GDP growth rates- and in Saudi Arabia they exceeded 8.1 percent, according to the last three readings, and in the UAE between 5.5 and 6 percent, and the performance of the Kuwait and Oman markets was very good, and he said that this performance was a reflection of two factors, the first is the rise of oil prices to high levels between 80 and 100 dollars per barrel, which is good. It is very important for the economies of the Gulf, and oil revenues have helped to increase surpluses and create the necessary liquidity for the implementation of economic development plans in the Gulf countries. As for the second factor, according to Yassin, it is related to the policies and those who lead them in the Gulf countries. , and all of these are ambitious economies that aim to expand, build and develop infrastructure, whether they support the petrochemical or non-oil economy, which is currently led by Saudi Arabia at the level of the Gulf.

Yassin added: “Today, we are witnessing a large number of ambitious projects launched by Saudi Arabia and the expansion of these projects to achieve the Kingdom’s 2030 vision. When oil prices briefly fell two years ago, the UAE continued to spend capital on expansion operations and increased production , and then we saw growth and renaissance in those sectors.The tensions that followed the Russo-Ukraine war, where the UAE, and especially Dubai, were at the top of the choices of investors, business people and wealth owners, whether from Russia or Ukraine, given to the fact that the UAE possesses many ingredients, including strategic infrastructure and the service sector at the highest levels, with the ability to attract a large number of investors, which has had a positive effect mainly on the country’s real estate sector, especially luxury real estate, as the class of wealthy people and capital owners have flowed into the country, and therefore all these ingredients had a significant positive impact on the performance of financial markets.

bull market

And Muhammad Ali Yassin believed that one of the indicators that the Gulf’s financial markets were rising or in a “bull” market phase was the size and number of initial issues. In billions of dirhams, as we have witnessed demand for shares offered in some companies exceeding 30 times, 50 and even 90 times, as we saw in the strong demand for the initial public offering of an Emirati company (Bayanat AIPLC), as it exceeded the subscription limit for 90 times, then these companies are listed on the market and maintain good price levels. Therefore, this positive performance reflects investors’ confidence in investing in the Gulf market, and even foreign investment is considered high at this stage.” He continued, “All these data are positive and a sign that 2022 was an upward year.” Or a “bull” market for Gulf financial markets, at least so far, because the current year is not yet over.

The effect of rising interest rates on the market

Yassin added: “It is difficult for any analyst or investor to make long-term forecasts. There are many variables that are happening in the global markets. There is the issue of inflation and its treatment by raising interest rates in the United States, and this of course has direct effects in the region, as the economic cycle in the Gulf countries is different from their counterparts in America and Europe,” emphasizing, at the same time, that the Gulf economies are growing and are in the phase of consumption and economic development, and therefore we do not want to slow down the economy by raising interest rates, and believes that raising interest rates could affect markets as it will slow down economic acceleration. Also, rising interest rates in the Gulf countries will create difficulties for companies, especially the private sector, in terms of accessing financing at reasonable prices, and may also cause a slowdown in the real estate sector.

Yassin indicated that in order to know the next impact, in 2023, we need to monitor oil prices, as it is clear that exporters want to maintain price levels, adding that there is an average price of Brent crude between $80 and $100 per barrel, and “in my opinion, if we manage to maintain these levels in 2023, nothing will prevent the continuation of the ongoing economic cycle and spending on state projects, and some Gulf countries will have a surplus even in the process of strengthening private foreign exchange reserves, and even they will have the opportunity to invest in foreign projects, and not only in the process of internal development.

Positive effect of Gulf financial markets

Yassin added that in terms of the financial markets of the Gulf, their performance has been positive since the beginning of 2022, and in some markets it is lower compared to 2021. As for 2023, at least during the first quarter of the year or even the first third, it is expected that we will be able to There were no geopolitical effects that change the pattern we see now, that the phase of positive movement continues, although at a slower pace than last year’s levels, with the continuation of the initial issue market and the initial offer of companies and the growth process when they are listed on the secondary market, noting that the success of companies and their distribution is also important, and Yassin felt that it was difficult to predict the performance of financial markets for the whole of next year, but he said that looking at the first three months of the year, we will see that the momentum for 2022 will continue to be positive in case the current factors do not change or worsen or any development occurs Adversely impact investors’ appetite to invest in the local market.

Foreign purchase and sale

For his part, the Kuwaiti writer, economic analyst, Muhammad Ramadan, saw that looking at the performance of the Gulf markets, we will see that it is higher compared to the beginning of this year, and this is due to the fact that the Gulf Markets are linked to the US dollar, which rose in compared to other currencies in the world, and the Gulf markets are also linked to oil prices that experienced a significant increase due to the Russian-Ukrainian war, which increased the demand for energy, and added that these factors led to a wave of growth in the Gulf markets, and the Kuwaiti the writer noted the wave of anxiety sweeping global markets, including rising interest rates and other economic problems which in turn are affecting investor appetite, especially outside the Gulf Cooperation Council countries for investment, and said a decline in investment is possible, adding that markets Gulf countries have become more important for foreign investors worldwide in recent years, and therefore direct investment will occur. the impact of any global economic conditions on foreign buying and selling in the region’s markets, and concluded, based on this, that we will see large fluctuations related to oil prices and also related to how foreign investors view the region.