Gulf markets attracting more international investors

Reuters/Christopher Pike

• ‘Significant interest’ in GCC growth
• Region ‘an attractive destination’
• Only China remains aloof

International investors are increasingly considering opportunities in Gulf markets, according to traders and observers.

The only exception is China, where interest in investing in the Gulf remains relatively low. 

GCC countries raised $6.8 billion through 29 offerings during the first nine months of 2023, buoyed by a privatisation push in Dubai, several record-breaking listings from state-owned energy providers in Abu Dhabi and a rush of initial public offerings (IPOs) in Saudi Arabia.

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• Jack be nimble, if you want to make money in the Tadawul

“There is clearly very significant interest in being exposed to the growth that this region has to offer,” said Julien Lafargue, chief market strategist at Barclays Private Bank.

As reported by AGBI in December, Saudi Arabia’s capital market regulator has confirmed that 46 IPO requests were under study in the third quarter of 2023, with the kingdom’s lower-tier stock market, Nomu, poised for a further flurry of new listings this year.

The whole region was under the spotlight, driven currently by Saudi Arabia, Lafargue said.

In its latest results, Dubai Financial Market (DFM) revealed that foreign investors contributed 47 percent of its trading value net purchases, for a total of AED5.1 billion, with foreign investors’ market capitalisation share at 20 percent at the end of 2023.

In 2023, the number of IPO deals globally fell 8 percent, with the amount raised down by 33 percent compared with 2022.

The GCC equity market index closed 2023 with a gain of 3.7 percent, outperforming several other emerging markets.

Scott Livermore, chief economist at Oxford Economics, said: “The GCC will continue to be a bright spot on the global economy.” A stream of IPOs was likely to further deepen capital markets, he said.

International investors’ interest in Gulf markets has seen the region’s representation in the MSCI Emerging Markets Index grow from 1.6 percent in 2016 to 7.7 percent in 2022.

Vikas Lakhwani, chief revenue officer at the broker CPT Markets, said this made the Gulf “an attractive destination for both passive and active investors looking to tap into its growth potential.” 

Marwan Haddad, managing director at the investment management company Azimut Group, said liquidity has been coming from UK and European managers who have been long-standing investors in the region. North American investors have shown interest, but substantial allocations have yet to materialise, he said.

“Notably, investors from Asia have recently displayed significant interest, particularly since countries that they traditionally favoured, such as Russia and Ukraine, have now become un-investable, and China, lost its allure,” Haddad said.

China’s economy, once hailed as the “poster boy” for investors, according to Lafargue, is struggling as the country continues to negotiate its post-Covid recovery, coupled with a crisis in its real estate sector and continuing geopolitical tensions.

But that does not mean that Chinese money will be headed for the relative safe haven of the Middle East markets, according to Raymond Ma, chief investment officer for Hong Kong and China at Invesco.

Chinese interest in the Middle East is “still a bit far away because this needs education,” he said. “I think Chinese knowledge about this area’s investment is about property, more than the financial industry.”