The UK’s largest wealth manager and financial advisory firm with over USD 220 billion funds under management, St. James Place (SJP), said the importance of Middle East in global financial markets continues to grow and the region is set to gain prominence amid global shifts.
Highlighting this at a discussion hosted by FTSE-listed SJP, featuring global investment manager Ninety One this week, experts said that GCC debt markets have been posting strong growth, and the Middle East sovereign bond markets, corporate bond markets, and equity markets will undoubtedly grow as the region attracts more foreign investment
The Investment Insights Breakfast discussion on October 23 was led by Angelina Lai, Chief Investment officer at St. James’s Place Asia and Middle East with guest speaker Tom Peberdy, Managing Director of the UK Client Group at Ninety One.
Speakers said GCC bonds had performed so well that they were now viewed as almost expensive from a secondary market perspective. Spreads were tight, and bonds had performed strongly, with new issuance set to provide further opportunities for diversification and exposure.
The growing GCC equities market is set to provide additional opportunities for international investors, attendees noted. GCC stocks are becoming a growing part of emerging markets benchmarks and are set to benefit from significant government investment in the region as GCC nations look to become leading financial centres.
The UAE was described as a nation with a “clear vision, strong focus, and dynamic plan” to deliver sustainable economic growth and energy security. The broader GCC was credited as an evolving market that is set to become “more prominent in financial markets over time”.
Global market risks
Overall, there had been “peaks and troughs” in global markets so far in 2024, speakers said, but markets were generally in a strong position. Global equities had seen a strong rally, while fixed income had struggled in a rising rate environment.
The strong performance of global equities this year has been largely driven by US stocks, notably the “Magnificent 7”, according to the discussion. A larger-than-expected 0.5% Federal Reserve rate cut helped the US market shake off recession fears and concerns about tech stock valuations, yet the broader S&P 500 outperformed the ‘Magnificent 7’ tech companies in the third quarter of the year.
While speakers agreed that it had been a strong year for financial market returns, they struck a note of caution about rising nervousness and a shift in market dynamics in recent months. With rotation seen in markets, there was an ongoing need for careful selection and resilience in thoughtfully constructed portfolios amid valuation pressures.
Although global interest rates are finally set to fall as inflation starts to come under control, volatility will persist, speakers predicted. Market “noise” around the persistence of inflation and the strength of the US economy is set to continue, with the path to growth far from easy.
The Chinese government’s recent stimulus package was seen as a major event, and one that may finally improve sentiment and the outlook for the major economy. On the last day of the last quarter, the Chinese index (the CSI 300) was up by 8.5% in local currency terms, its strongest daily performance in 16 years.
Geopolitics impact outlook
Geopolitics will impact markets in the final months of the year, speakers noted, amid the US election, the war in Gaza, Lebanon, and Russia and Ukraine.
Investors should not be trying to call the outcome of the US election but instead should be thinking about possible scenarios following November 5. Investors were urged to take a longer-term view and focus on policy implementations that will impact markets more fundamentally.
Markets were pricing in a push towards peace in the Russia-Ukraine conflict, yet the European war, alongside the conflicts in the Middle East, had resulted in volatile oil pricing, a course that’s likely to continue. Measures of risk sentiment were at elevated levels, but not at extremes.
Global market dynamics are shifting, speakers said. The world is becoming multi-polar and less dependent on the US economic cycle. Debt, demographics, China, climate change, and technology were highlighted as the core themes expected to drive global markets in the coming decades.
Due to geopolitical uncertainty, attendees were advised to keep a medium-to-long-term focus and avoid speculation and short-termism in their investment approach.
