Riyadh - Arabstoday
Emirates NBD, a leading bank in the region, forecasts a 3.8 percent growth in Saudi GDP in 2012, backed by public sector spending, even as the global economy continues to lose momentum. With the oil sector remaining the main source of revenue for the Kingdom, the price of oil is forecast to remain at above $100 per barrel. \"Overall our view of the Saudi market is positive,\" said Gary Dugan, chief investment officer at Emirates NBD Private Banking. \"Population demographics should have a positive effect on the economy, benefiting the telecoms sector in particular, whilst the Saudi banking sector benefits from the fact that the balance sheets of its banks are mostly domestically-driven.\" On the equities front, the bank foresees the outlook for Saudi petrochemicals, banking and telecoms sectors to have the greatest impact on market performance, given their dominance in Tadawul. The food and retail sector should also benefit from the trickledown effect of increased government spending and consolidation in certain segments of the industry. If and when adopted, foreign ownership in the equity market should provide a big boost to the region\'s markets, he added, given that the Tadawul Index is the largest and most liquid stock market in the region, which may also act as a catalyst for investors to enter other regional markets. Further afield, in the majority of the emerging market countries, with the exception of China and Russia, demographics are also to provide a solid basis for further strong growth well into the future, according to the chief economist of one of the largest private banking units in the region. \"We believe that emerging markets will also continue to grow, despite challenging conditions globally,\" said Dugan. \"Even if the euro zone is in recession and struggling to make headway, emerging markets should continue to see solid economic growth, underpinned largely by demographics, including a young, vibrant population that is still growing in the Middle East,\" he added. On the outlook globally, Dugan said that many challenges lie ahead as the world comes to terms with the ongoing pace of structural change. Describing 2012 as \"a year with many imponderables,\" he said there are numerous issues facing investors, and that the range of potential outcomes is greater than those faced for many decades. \"There will be questions for investors surrounding the euro zone, US efforts to cut its deficit spending, Japan\'s paying of low interest rates on its debt, against a bleak long-term economic backdrop, the possibility of further phases of the Arab Spring in 2012 and its impact on the GCC markets,\" he said. Amidst these uncertainties, Dugan advised that 2012 is a year to \"invest in what you know to be true, rather than what you hope to be true.\" \"Investors should look to regions and industries that have strong long-term structural growth prospects, rather than trying to second-guess what is going to happen in the euro zone,\" he continued. \"Growth sectors to look out for include energy, pharmaceuticals and technology, which will offer long-term opportunities for investors.\" He remained skeptical about global equities in the early months of 2012, but said that there is sufficient money in the financial system, and sufficient growth in the global economy for the world to get on to a better footing at some stage. When the time comes, investors should look for buying opportunities in Brazil, China and Russia. The prospect of lower interest rates and other growth-supportive policies in these countries should ensure positive returns. With so much uncertainty in the world, bonds are likely to remain the asset class of choice for many, but investors must be selective. \"With yields so low in the \'safe\' bond markets of the US, Germany and UK, we would encourage investors to look more to the corporate bonds and emerging market bonds,\" said Dugan. \"In the GCC, bonds and equities are more highly correlated than before. Local investors should diversify with emerging market bonds and keep cash for opportunistic investment.\" He encouraged staying liquid by keeping larger cash, or near-money balances than in the past, but cautioned that cash will remain a place to hide, rather than make significant returns. Finally, he urged investors to remain agile. \"Don\'t get anchored in your views,\" he warns. \"The world is changing very rapidly. Many companies are challenged by the pace of change around the world, and only some are making the necessary changes to remain competitive. What was a good investment in the past may be an irrelevant investment in the future.\"