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July 5, 2020
Estimating future returns for Saudi Arabia Stock Market
Need an equity market framework It is a classic mistake that all of us can be guilty of at some point in time. Mistaking historical stock market returns as a good proxy for future returns. While optimism breeds optimism, pessimism breeds pessimism. If we have a great decade (like how S&P 500 is), it will be nearly impossible to be utterly pessimistic and vice versa. Time and again it has been proved that history never repeats but rhymes. However, intuitively...
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July 2, 2020
10 million and counting: COVID -19 breaches a grim milestone
As 2020 began with new hopes, little did the world know about an emerging threat coming out of the most populous country on Earth, a virus which spread like a wildfire in no time. The contagious nature of the virus made it more so difficult to contain it. The World Health Organization (WHO) declared the outbreak a Public Health Emergency of International Concern on 30 January 2020, and a pandemic on 11 March. On 28th June 2020, the global confirmed...
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June 17, 2020
Kuwait Sector Indices: Comparison of declines due to COVID-19 and 2014-16 Oil Price Crash
The 2020 market crash has been fast and short, if the trough of March 2020 holds. Lockdown to prevent the spread of COVID-19 brought about an uneven impact on sectors. While some sectors like airlines came to an absolute standstill, some sectors like technology stand to gain from the lockdown. These differences have reflected in the performance of equities too. A sector-wise comparison with the previous market crash of 2014-16 highlights the difference in COVID-19’s impact on sectors and what...
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June 14, 2020
Fund houses revise their long-term capital market expectations – What has changed?
The unprecedented turn of events in recent times has drastically changed the outlook of the global economy in the near term. The economic disruption caused by COVID-19 has triggered global central banks and governments to act, changing the whole landscape for financial and real assets both in the short and long term. Things look much different now as compared to the end of 2019. Several asset classes witnessed a sharp sell-off and a subsequent recovery in recent months. Everything from...
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June 8, 2020
Implications of COVID-19 on GCC Asset Classes
COVID-19 has rendered economic outlook and companies’ performance projections for 2020 meaningless in a single stroke. Heightened uncertainty has become an everyday reality in the current times. As the coronavirus scare continues, the world is faced with multidimensional issues and tough questions, be it finding an effective treatment for the virus, zeroing in on an optimal quantum of stimulus or deciding the right time to lift lockdowns. With measures like social distancing and lockdowns affecting day-to-day lives of people, asset...
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June 7, 2020
Impact of Covid-19 on GCC REITs
The GCC has seen a number of Real Estate Investment Trusts (REITs) listed in stock exchanges in the past few years. This accelerated after Saudi Arabia’s Capital Markets Authority (CMA) approved the listing of REITs in 2016 as a part of the National Transformation Program (NTP) and Saudi Vision 2030. Due to the economic crisis in the wake of the covid-19 pandemic, many of the listed REITs have seen a steep decline in their share prices and market capitalisations. Saudi...
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June 7, 2020
How to improve the Secondary Market for Sukuk Bonds
This article was first published in Islamic Finance news Volume 17 Issue 22 dated the 3rd June 2020 Sukuk bonds have been gaining in popularity since their first issuance in 1990. According to the International Islamic Financial market (IIFM), Global Sukuk Issuances with maturity over 18 months totalled USD 42 billion in 2019, a growth of 6% over 2018 and nearly 40% over 2009. However, in-spite of the rise in issuances, the secondary market for Sukuk Bonds has remained illiquid...
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May 17, 2020
Impact of Oil Price Volatility on GCC economies, markets and businesses
Closely intertwined with economic growth, oil has been vulnerable to global growth outlook. The recent collapse in oil prices caused by demand destruction on account of COVID -19 was exacerbated by the OPEC+ disagreement, pushing prices down to historically low levels. In the current dynamic scenario, where the world is controlled by COVID-19, while news on OPEC+ agreement, stimulus etc. causes some increase in prices, news on extension of lockdowns and filling up of oil storage causes a steep fall...
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May 14, 2020
GCC Governments should tap the idea of perpetual bonds
Spain proposed an interesting financing mechanism, though not unprecedented, to fund the recovery measures against COVID-19 pandemic impact by issuing bonds without maturity date. The bond, popularly known as ‘perpetual’, has no set date for redemption and the government pays coupon until it decides to buy the bond back. The idea resonated well among many as it could offer and easy and low-cost way to finance the proposed amount of EUR 1 trillion (USD 1.08 trillion). Based on various estimates,...
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May 7, 2020
GCC fiscal deficits and financing post COVID-19
The economic repercussions of the impact of novel Coronavirus and the subsequent breakdown of OPEC+ supply cut agreement is unprecedented for the gulf economies. The sudden freeze in economic activity due to various measures such as travel restrictions (curbs on flights, public transportations and taxis), closing of schools, universities, shopping malls, commercials establishments, and curfew imposition to prevent the spread of virus has created a demand shock. Transportation sector that accounts for approx. 50 percent of global oil demand by...