NCB Capital hosts investment seminars providing updates on global economies and equity markets

NCB Capital, the Kingdom’s largest asset manager and leading wealth management company, hosted exclusive investment seminars for key corporate clients in Jeddah, Riyadh, and Dammam. The events featured an in-depth assessment of the outlook for the local and GCC equity markets in 2012 and updates on the regional and global economy. 

“Markets around the world are changing and so are investors’ requirements. As a result, investment companies should become closer to their clients, listening to their needs and coming up with tailor-made investment solutions that cater to their specific requirements and help achieve their investment objectives,” said Tariq Linjawi, Head of Wealth Management at NCB Capital. “By hosting these investment seminars NCB Capital affirms its leadership position as the Kingdom’s largest asset manager and leading wealth management company by adapting to today’s challenging markets that are fast changing the dynamics of wealth management in Saudi Arabia and the world”. 

Giving an overview of the Global and GCC economic outlook, Dr. Jarmo Kotilaine, Chief Economist at National Commercial Bank said, “There is tentative consolidation globally but the main stress points remain in the Eurozone where the fiscal situation of the peripheral economies is not sustainable, with growing political risks and the danger of a stagnation trap”.  

Looking at emerging markets Dr. Kotilaine commented that while inflation still persists, efforts have been made to contain inflationary pressures, although money tightening is hampering strong growth. Brazil, China and India have all increased interest rates which is having a negative impact on their growth. However, with interest rates in the West still near historical lows, there appears to be a carry trade opportunity on account of interest rate differentials. This could further fuel asset bubbles in the emerging markets due to the widespread perceptions of their superior performance. Nonetheless, the forward-looking indicators are discouraging according to Dr. Kotilaine. 

Turning to the GCC, Dr. Kotilaine anticipates that growth will slow down in 2012 but observed that here are upside risks. The rebound in oil prices is flushing GCC governments’ finances and government spending remains high. Stress points have been dealt with effectively and private sector activity has resumed with bank lending picking up. 

Dr. Kotilaine considers that Saudi Arabian growth will normalize in 2012 after a strong stimulus-driven rebound, and with the oil price expected to remain strong both the fiscal and external positions will likely remain extremely comfortable. There are encouraging signs on project spending and the budget break-even oil price is steadily increasing but remains comfortably behind the market levels. Government debt levels have fallen to record lows, triggering a new wave of semi- sovereign sukuk, inflationary pressures are abating, and a private sector recovery is underway. 

Commenting on the Saudi and GCC equity markets, Farouk Miah, Head of Equity Research at NCB Capital, pointed out that the Saudi market is considered the biggest in the region accounting for 52% of GCC market capitalization and 90% of GCC turnover. “It is a leader in relative liquidity at about 86% turnover to market ratio cap, an important point as smaller regional markets are continuing to suffer from low liquidity and thus reduced interest from institutional investors” Highlighted Mr. Miah. 

Noting that average daily turnover has picked up in the GCC since the start of 2012, increasing by 51% YoY to USD 2.1 billion, Mr. Miah pointed out that this is mainly led by Saudi Arabia which has seen a YTD increase of 62% to USD 1.9 billion compared to smaller economies such as Bahrain which is seeing a 50% YoY decline. 

Mr. Miah commented that while the Saudi stock market was down 3.6% in 2011 YoY, earnings for the listed companies actually increased by 22% against 2010. Underlying fundamentals remain strong and earnings for the stocks that NCB Capital covers in its award-winning market analysis reports, which account for 95% of total market earnings, should increase by 18% in 2012e, crossing the SR100bn mark for the first time. 

The seminars gave in-depth analysis of the Saudi capital markets and key stocks covered by NCB Capital, helping the investment community understand the dynamics of the market and the positioning of various companies and sectors against local and global demand drivers. NCB Capital projected 18% growth in net income for the petrochemicals sector, largely off the back of new production facilities coming on-stream in 2012 and despite a weaker demand and price outlook. Key positives are the prevailing cost advantage and proximity to Asian markets. 

In respect of the Saudi banking sector, NCB Capital expects to see 10% growth in net income due to decreasing provisions and an increase in non-interest income. Among other sectors covered, the cement sector has a positive outlook with strong demand, mainly led by government projects, and NCB Capital expects KSA sales volumes to increase 10-12% in 2012 to 53-54 million tons. In addition NCB Capital provided comprehensive analysis of the real estate, hospitality, telecoms and retail food sector. 

With over one million clients and SR44 billion ($11.7 billion) of assets under management (as at October 2011), NCB Capital is the Kingdom’s largest wealth manager. It is a world leader in developing Islamic investment products and has a proven track record and awards in this area. In 2011, NCB Capital won a total of 17 awards including the Best Fund Manager by Euromoney, and Best Equity House in Saudi Arabia by EMEA Finance.