Saudi market’s fluctuations to continue through Q4 2024: EFG Hermes

Ahmed Shams El Din, Head of Research at EFG Hermes

EFG Hermes expressed optimism about the performance of the Saudi capital market in Q4 2024, expecting fluctuations to continue till year-end, amid speculations about an interest-rate cut soon, which has been generally priced in by markets.

In an interview with Argaam, on the sidelines of EFG Hermes Investor Conference held in London, Ahmed Shams El Din, Head of Research at EFG Hermes, said the possible market fluctuations are deemed normal and healthy, for providing investment opportunities for those who know how to capitalize on them.

He also pointed to the undervalued opportunities currently in the Saudi market, which will likely appear in the fourth quarter of this year.

Sectors such as retail, building materials and maritime transport still offer strong opportunities, especially with the move towards mergers and acquisitions. In addition, population growth and megaprojects have begun to reflect on the local consumption and infrastructure sectors, he added.

The transportation sector, especially maritime transport, represents a huge investment opportunity, especially amid fair valuations. Current shipping fees bode well for sector companies’ profitability, as well as in the public utilities sector, which will benefit from the interest rate cut and offer higher dividends, he further stated.

Saudi Arabia is one of the strongest markets that EFG Hermes operates in, thanks to its strong fundamentals and depth. Foreign investors have begun to play a greater role in the Saudi capital market, constituting about 20-25% of the daily traded volume, compared to 90% by individual investors previously, said Shams El Din.

He stated that Saudi Arabia's weight on global indices amounts to roughly 4%, while active investors account for only about 1.5%. He also underlined that there are huge opportunities to boost cash flows and foreign investments in the Saudi market, thus bolstering its position among key regional markets.

As for the new IPOs, Shams El Din stated that the Saudi market is capable of absorbing more offerings, given its depth and representation of several economic activities to meet Saudi Vision 2030, which targets economic diversification away from reliance on oil.

The Saudi capital market has witnessed greater participation from foreign investors and institutions in H1 2024, backed by IPOs and secondary offerings that spurred market activity, the research head confirmed, noting that the Saudi capital market and sukuk still enjoy strong liquidity that enables them to support more offerings and investments.