The MENA region has been on a tear in 2021. Countries in the Middle East with a USD pegged currency benefited from the global low rate environment and by an ever growing pool of assets that flows from low yielding cash and fixed income instruments. The index heavy weight market, Saudi Arabia, gained 16% for the quarter on the back of positive news flow and a strong momentum for oil prices. According to OPEC forecasts, oil demand will rise on a quarterly basis during the rest of the year, but still end up 3.5% lower than pre-pandemic levels by the end of 2021. The OPEC+ group has been quite flexible and adaptive since the start of the pandemic and, faced with continuing uncertainty, we can expect the group to maintain its proactive approach oil production restraints, which should provide some price stability going forward. The Saudi government announced an ambitious long-term investment plan called “Shareek” which in size equals a massive 40% of the Kingdom´s GDP. The key message of the initiative is that the investment focus going forward will be on the local economy rather than on investments abroad. The market was further bolstered as it was reported that around 70% of citizen and residents, who are registered to receive the covid-19 dose, have been vaccinated.
A number of significant and exciting MENA listings are expected in the fintech and technology sector. Markets are also supported by a strong commodity cycle and supportive government policies, so the outlook for MENA equities remains bright.
Sources: Bloomberg LP, MSCI