Around the end of the 1960s, there was a significant turning point in the US economy; the share of services in the country’s gross domestic product exceeded the share of goods. In other words, the US moved from being a manufacturing economy to being a services-based one. In the early 1990s, the growing use of computers and the internet accelerated that change.
“We may have gone further than usual this year in our Global Investment Outlook, but more than ever we are especially excited about the road ahead for the local MENA markets, with a special focus on UAE stocks.”
Alain Marckus, Head of Asset Management
From regional, to global investment expertise
In 2021, MENA equities as a class delivered a strong performance compared to global indices, and that is likely to continue this year as the countries in the region have changed rules creating liquidity and increasing the attractiveness of local stocks for international investors.
Successful vaccine rollouts, a faster reopening, increasing oil output and higher prices will continue to contribute to MENA’s economic growth and fiscal rebalancing, which bodes well for regional fixed income markets as they continue to expand and develop.
With Asia set to reopen and the US dollar potentially reaching its apex along with the tightening cycle for many western emerging market central banks, the local EM currency bonds could become a very attractive proposition late this year.
Global allocators should probably always expect EM equities to trade at a large discount to developed country equities. They were trading at a larger than usual discount towards the end of 2021, but that discount may remain deeper as central banks in emerging markets and structural issues are resolved this year.
Developed market central banks have started to reduce some of the extraordinary monetary easing implemented in the wake of the pandemic. This, however, is unlikely to dent still healthy global growth this year.
After a year of stellar performance, the drivers of performance may differ this year. Despite last year’s gains, a ‘melt-up’ is still possible as ‘fear of missing out’ takes hold. Earnings growth of close to 10% this year could also continue to support US markets, which are likely to remain in the lead.
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