MENA investors prepare for dynamic 2024 amid global unrest

In today’s highly interconnected global economy, geopolitical events and market fluctuations significantly influence investment strategies. Investors in the Middle East are currently navigating a complex landscape marked by both challenges and opportunities, especially in the context of soaring interest rates.

Saxo Bank MENA does not see 2024 as a quiet year, given the global political climate, including major national elections in the US and the UK, ongoing conflicts, and the emerging Red Sea crisis affecting shipping and logistics.

In response to the sharp rise in interest rates during 2022-23, MENA investors have shifted their focus toward cash and fixed income (bonds), seeking international markets for portfolio diversification, according to Damian Hitchen, CEO of Saxo Bank MENA.

Hitchen highlighted that Middle Eastern investors’ long-term wealth growth strategies vary significantly.

Middle Eastern’s long-term investment strategies

Locally, real estate assets have been a preferred as a growing asset class over the past two decades, as evidenced by the recent surge in the market.

Excluding those who own their own businesses, the most common asset classes are equities, ETFs, and mutual funds, with a renewed interest in bonds.

Hitchen also noted a significant increase in clients trading leverage or margin products such as FX, CFDs, and derivatives. Additionally, there is a growing interest in cryptocurrency assets among less experienced investors in the region.

Regarding US equity markets, these remain a cornerstone for most investors’ portfolios, with over 90 percent of Saxo Bank MENA’s clients holding US equities.

Hitchen described US equities as a “foundation” in almost all client portfolios, a trend consistent across other banks and platforms.

Investment in local and domestic markets has also increased over the past 5-7 years. Hitchen believes that positive economic developments in the UAE and Saudi Arabia, including increased IPO activity and liquidity in local exchanges, have contributed to this trend. The most traded industries in recent months include technology, energy, finance, and healthcare, with a notable increase in investments in defense companies due to ongoing regional conflicts.

Saxo Bank MENA Outlook

For the US market, the outlook is mixed, with some predicting rate cuts starting in March due to defeated inflation, while others foresee continued inflation challenges until the end of 2024. Hitchen summarized the outlook for US stocks in 2024 as either potentially yielding another year of impressive returns or facing significant volatility.

Overall, the investment landscape in the Middle East is evolving, with investors adapting to global and regional economic shifts and uncertainties.