SNB Capital: Investment fund managers Q4 outlook on Tadawul turns bullish

Tadawul trading screen

SNB Capital stated that investment fund managers' expectations about the performance and evaluation of the Saudi Exchange (Tadawul) turned positive for the fourth quarter of 2023. The percentage of fund managers with a negative outlook declined to the lowest level since the survey's inception.

The percentage of fund managers with a bullish Q4 2023 outlook reached 50%, compared to 40% for the third quarter of 2023. Meanwhile, the percentage of fund managers with a bearish outlook for the fourth quarter of this year decreased to only 8%, from 20% in Q3, according to SNB Capital's survey on fund managers.

Fund managers maintained their forecasts that oil prices, interest rates, and inflation would be the main market drivers. In general, most managers expect oil prices in 2024 to range between $70-79.9 per barrel, down from $80-89.9 each in the third quarter of 2023.

As for interest rates, 58% of fund managers expect at least one interest rate cut during 2024, while 35% of them forecast rates to remain unchanged.

Although the majority of fund managers believe that the market is valued at its fair value, the percentage of those who see the market undervalued in Q4 2023 rose to 23% (compared to 10% in Q3 2023).

The fund managers continued to prefer the tourism and healthcare sectors. Besides, they upgraded their outlook for the banking sector to bullish from bearish. Meanwhile, the percentage of fund managers with a negative outlook for the consumer goods sector slumped.

According to the report, the fund managers expect the banking sector to be the top performer in 2024, followed by tourism. Meanwhile, most of them anticipate the petrochemicals sector to be the weakest performer.

As for the most attractive sectors to participate in IPOs, the fund managers maintained their preference for the tourism, healthcare, and pharmaceutical sectors.

The percentage of fund managers who maintain a liquidity ratio higher than 20% of assets decreased to 12% in Q4 2023 from 25% in the third quarter of 2023. Meanwhile, more than 80% of fund managers maintained a liquidity ratio of less than 10% of assets.

Fund managers’ preference for the balance and distributions strategy increased in the fourth quarter of 2023, with the growth and value strategy remaining the most preferred.

Most fund managers, according to SNB Capital, expect the Saudi GDP to rise at an estimated growth rate of 4.4% in 2024. As much as 70% predict corporate profits to grow in 2024 by 5–10% year-on-year (YoY), while 23% of them expect no change in corporate profits.