Foreign investors cut Gulf stocks even before Trump-led turmoil

• Sell-offs started before tariffs announcement
• Largest Saudi outflow since April 2024
• Companies missing profit expectations

In the build up to the biggest global stock market rout since at least the Covid-19 pandemic this month, foreigners were net sellers of more than $400 million of Saudi Arabian equities in March.

This was the first net monthly outflow of the year and the biggest since April last year, as disappointing earnings made investors more risk averse.

Non-resident traders also cut their exposure to Abu Dhabi and Qatar-listed companies last month, in what seems a prescient move ahead of US President Donald Trump’s announcement on April 2 introducing the highest US tariffs in more than a century.

“This pullback coincides with a sentiment shift,” the investor relations consultancy Iridium Advisors in Dubai wrote in a note.

Iridium’s GCC Earnings Call Sentiment Index, which analyses the content of 2,400 company earnings call transcripts, fell 0.6 points to 38.7 for the fourrth quarter of 2024, down from Q3 and Q2’s all-time high of 41.3.

The decline shows a widening gap between upbeat management tones and more sceptical analyst questions and answers, Iridium wrote.

Three out of every five listed companies in the six-member GCC missed analysts’ earnings forecasts for fourth-quarter profits, it said.

This is the first time in five quarters that a majority of GCC companies have come up short of analyst expectations, since the third quarter of 2023.

In March, Saudi Arabia’s bourse recorded net foreign outflows of $407 million, Qatar’s $217 million and Abu Dhabi’s $206 million. 

Two Gulf stock markets, Dubai and Kuwait bucked the trend, with net inflows of $145 million and $286 million respectively.

Cumulative inflows of more than $4 billion since early 2020 helped Dubai’s benchmark soar to a 17-year peak in February, while Kuwait’s premier index reached a three-year high in early March.

Both measures have since fallen back. Gulf stocks have been volatile this month after Trump’s tariff announcement.

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Gulf bourses suffered precipitous declines in the immediate aftermath of the announcement, but have recouped much of their losses, though most remain down to date this year.

“While the official announcement came on 2 April, foreign investors may have already started adjusting allocations in March,” Iridium said. 

“The resulting global equity sell-off implies these risks were not fully priced in, making March outflows a potential early warning signal.”