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Saudi Arabia's SNB Capital said that the outlook for the capital market and valuation among investment fund managers in the kingdom is mixed, being equally split between bullish and neutral. Additionally, bearish views have increased, compared to the last quarter's survey.
Bullish and neutral views each represented 40% of the survey response, while bearish views increased to 20% from 10% in Q2 2023, the investment bank and asset manager said in a report on Monday.
Although most managers' views indicate fair valuation, fund managers who believe the market is fairly valued decreased to 60% (from 77% last quarter) while managers who believe the market is overvalued increased to 30% from 10% in Q2 2023.
Those surveyed remained bullish on Tourism and Healthcare sectors and became less bearish on Petrochemicals. On the other hand, the managers were mainly bearish on Consumers sector.
On IPO activity, the managers maintained their preference for Pharma and Healthcare as the most attractive sectors to participate in.
On asset allocation, fund managers who kept a cash level of more than 20% increased to 25%, from 16% last quarter and back to Q1 2023 levels.
Moreover, the managers shifted their preference to growth as the best investment strategy, followed by value.
For the best and worst performing sectors in 2024, the Petrochemicals sector had the highest opposing views which SNB Capital believes "reflects the current uncertainty of the sector".
For market earnings, 65% of the managers expect the market earnings to grow by a single digit year-on-year (YoY) in 2024 while 25% expect earnings to remain flat YoY.
Fund managers believe oil prices, interest rates and inflation will be the main market drivers. They expect oil prices to be at a range of $80-$89.9 in 2024.
On interest rates, most expectations point towards one additional hike in 2023f, followed by a pause in 2024.
The majority of the managers expect the Saudi GDP to grow at its expected level of 5.7% in 2024.
(Writing by Brinda Darasha; editing by Seban Scaria)
