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Fund managers ready to allocate investments to Saudi stocks: Half of the fund managers who participated in a survey conducted by SNB Capital plan to increase their exposure to Saudi stocks despite maintaining a "neutral" outlook for the market in 1Q 2025, Al Arabiya reported on Tuesday. Meanwhile, 18% of managers plan to reduce their Saudi stock exposure, up from 8% of participants in the last quarter of the previous year.
Value stocks benefited from recent market declines: Value stocks, which trade at attractive valuations, have benefited from the market declines recorded since the beginning of this year, Iyad Ghulam, head of equity research at SNB Capital, told Al Arabiya. However, fund managers believe that corporate earnings will see single-digit percentage growth this year.
A third of those surveyed think the Saudi market is below its fair value: 29% of fund managers believe the local market is undervalued, while 10% consider the market overvalued, a drop 19% in 4Q 2024, according to Al Arabiya.
The majority, however, believe the market is fairly valued: The percentage of fund managers who maintain a neutral stance on the market, considering it fairly valued, stood at 60%, compared to 50% in the previous quarter, Ghulam noted. Meanwhile, optimistic views on the market declined to 23% this quarter from 41% in 4Q 2024, while pessimistic views rose to 32% from 16%.
Market outlook: Fund managers expect oil prices ranging between USD 65 and USD 69.9 per barrel to be the primary market driver this year. However, Ghulam pointed out that this is not a new factor, as oil has been the key market driver in the last five surveys conducted by the company. Other factors influencing the market include trade wars involving tariffs and weaker-than-expected corporate earnings results in 4Q 2024.
There is strong optimism among fund managers about the banking and technology sectors, with them favoring IPOs in the technology sector. However, outlook on the construction sector shifted to neutral this quarter, from optimistic in 4Q 2024. Pessimism has dominated the petrochemicals sector, with the percentage of fund managers viewing it as unfavorable rising to its highest level in two years at over 61%, Ghulam added.
What about Nomu? Some 39% of asset managers who participated in the survey are looking to increase their investments in the parallel market, down from 50% last year, while 58% of managers have maintained their level of interest. Managers believe the software and technology sectors are the most attractive in Nomu.
