The steady rise in Saudi shares over the past 18 months has prompted analysts at Morgan Stanley to admit they were wrong in their previous estimates.
“Saudi Arabia was the main country with the best performance of the MSCI index worldwide questyear, and it was also one of the countries with the best performance last year, “wrote US banking analysts in a note on Monday, and they updated their recommendation for the Saudi market in overweight: “Since we’ve been losing weight since May 2020, obviously we were wrong,” they said.
The Tadawul All-Share Index rose to its highest level since 2006 on the back of high oil prices and in an environment of increased retail investor activity. However, the index is still 42% below its own record 2006, when efforts to strengthen capital markets to help redistribute oil wealth helped, in to some extent, to a speculative bubble driven primarily by retail investors.
Morgan Stanley now believes the high valuations of Saudi stocks are likely to remain as the market is more profit-driven, which is expected to rise. Analysts also point out that while the foreign concentration in the country remains low, it has begun to recover.
On a broader note on the region, analysts wrote that Saudi Arabia has “one of the most powerful mechanisms for transmitting higher oil prices to economic activity than any other EMEA country” and its growth prospects appear to be structural and likely to last for several years Who benefits from rising material prices prime.
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