47% of investment fund managers upbeat about Saudi market: SNB Capital

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Investment fund managers’ bullish views on the Saudi market performance in Q2 2024 rose to 47%, from 41% in the previous quarter. Meanwhile, neutral and bearish views declined from 48% and 11% in Q1 2024 to 44% and 9% in Q2 2024, respectively, the latest SNB Capital Fund Manager Survey showed.

The report indicated that investment fund managers’ views of an undervalued market increased to 20% for the second quarter of 2024, compared to 11% for the first quarter of this year.

Survey participants also maintained their expectations that interest rates and inflation would remain key market drivers going forward, with 85% projecting one rate cut during the present year.

Oil prices are seen to range between $80-$90 per barrel in 2024, in line with the current levels.

The report pointed out that investment fund managers remained largely bullish on the Saudi tourism and banking sectors. Meanwhile, their bullish views on the insurance sector increased significantly in Q2 2024 and became the second preferred sector after tourism.

“Bullish views declined on the healthcare sector from 73% last quarter to 42% [in Q2 2024]. For IPO participation, preference for healthcare and pharma sectors remained, while the services sector is a new favorite for managers.”

Fund managers expect the banking sector to be the top performer in 2024, followed by the insurance sector. The majority continued to anticipate the petrochemicals sector to be the weakest-performing sector in 2024.

SNB Capital further explained that 54% of the managers plan to step up their Saudi equity exposure, while 38% predict their exposure to remain “broadly unchanged”.

“In terms of cash levels, 85% currently keep a cash level at less than 10% of [assets under management (AUMs)] (vs. 78% in Q1 2024), indicating increased [quarter-on-quarter (QoQ)] market exposure and general optimism about the market,” the brokerage wrote.

“Moreover, the managers maintained their preference for growth investment strategies and increased their interest in value strategies,” it added.

TASI profitability, according to most survey participants, is likely to grow at no more than 10% in 2024, of whom 65% are bullish managers and 35% are neutral, while 17% forecast profitability to remain flat.

In addition, 54% of the fund managers expect the Saudi GDP to grow by the indicated level of 4.4%. However, another 40% anticipate the Kingdom’s economic growth to see a pullback.