24/11/2017
Saudi Arabia is on track to join the FTSE and MSCI Emerging Markets
indices in 2018 and should be among the top 10 markets on the Emerging
Markets list, according to an international report.
Credit Suisse's report on investment prospects for 2018 said yesterday
that the Middle East could capture 7-8 of all emerging market stocks, a
feat since it was just a few years ago with zero weight, billions in the form of
investment portfolios, where active and passive investors would adjust
their exposure.
With regard to the global economy, its growth is likely to continue at
a steady pace even as monetary policy easing has slowed, and global GDP
growth accelerated slightly by 3.8 percent, with global inflation
reaching an acceptable 2.7 percent.
The report predicted that corporate capital expenditures, which have
been restricted in recent years, will become a major driver of future
growth.
Given this favorable environment, investors can look for strong
returns from risk-weighted assets in 2018, albeit in limited terms
compared to very good investment performance in 2017.
According to the report, economic growth is expected to continue at a
strong pace in the coming months, supported by both developed and
emerging markets, indicating a very low probability of a global
recession.
In the United States, increased corporate capital spending, improved
productivity levels, and potential fiscal stimulus are expected to
extend the strong business cycle to another year (2018 growth
forecast of 2.5 percent).
As for the euro area, it is likely to see a continuation of the strong
performance cycle that has recently begun, preventing an impending
political crisis or a sharp rise in the value of the euro.
The report predicted that emerging economies will remain a pillar of
growth in the global economy, with the risk of rising inflation and
interest rates as long as their currencies remain stable.
Turning to China, he stressed that it will continue to play a vital
role, as its contribution to the growth of the world economy is expected
to increase further because of its growing economic weight.
As China's leaders continue to focus on stability, the report predicts a somewhat adaptive process with currency stability.
Michael Strobeek, chief investment officer at Credit Suisse, said:
"The increase in corporate capital spending, the improvement in M
& A activity and the increase in corporate debt are expected to be
significant economic drivers in 2018."
"We
expect the next year to witness relatively good economic growth, which
will enable asset classes sensitive to growth changes to continue to
perform positively, but there are potential risks to be recognized,
whether political, economic, geopolitical or regulatory, .
Global
equity markets have additional growth potential in 2018, as strong
economic growth boosts profits and increases confidence, investment
experts said, adding that this should encourage further equity flows. The withdrawal of liquidity from central banks is the main challenge, especially in the last months of 2018.
Emerging market stocks are expected to generate total returns of two
small figures in 2018, with good prospects for small capitalization
stocks in particular.
In the developed markets, Japanese and Swiss stocks are expected to provide the best potential. Sectorally, preferences include health care, communications, industries and financial services. Eurozone real estate stocks also offer attractive opportunities for investors as they continue to generate high returns.
Regarding the fixed income, bond yields in most developed markets were expected to
rise moderately, while in the US they would be stable at about 2.7 percent.
