Investors ‘optimistic about Bahrain’s growth prospects’
A majority of investors have a positive economic outlook about Bahrain over the next 12 months, mirroring the sentiment seen in most GCC countries, finds a new study.
According to the inaugural investor return assessment survey by SICO, a Bahrain-based regional investment bank, investors are generally bullish about regional growth prospects over the next 12 months particularly when it comes to Saudi Arabia, Bahrain, UAE, and Qatar.
Three out of four (77 per cent) of respondents had a positive economic forecast for Saudi Arabia, a market that SICO has just expanded into with a full suite of financial services, and 53pc expected the economy in SICO’s home market of Bahrain to perform positively in the coming year.
Meanwhile, 35pc of respondents expect negative economic outlook for Kuwait and Oman, compared to 20pc for Bahrain.
As for Saudi Arabia and the UAE, only 5pc and 8pc of respondents respectively expected a negative economic outlook.
The ongoing rally in oil prices and the introduction of value added taxes imply lower than budgeted deficits, positively supporting post pandemic economic spending and rebound.
As a result, governments are expected to have more headroom to stimulate the economy going forward, says the report.
The online survey was conducted during the third quarter of 2021 asking two specific questions to investors about overall economic outlook and minimum unleveraged return requirements for different asset classes including listed equities, government bonds, real estate, private equity and cash deposits for all 6 countries in the GCC.
The survey respondents, primarily CEOs, CFOs, investment managers, fund managers, institutional investors and high-net-worth-individuals (HNWIs), represented a diverse mix of GCC enterprises and multinational companies, including both listed and private companies.
“After nearly two years of living with Covid-19 and the steep economic challenges and volatility that came along with it, we set out to provide some clarity and insight into the return expectations of investors in the GCC,” said SICO chief executive Najla Al Shirawi.
“We believe that a proper understanding of investor return requirements will allow investment banks and asset managers like ourselves to deliver the right products to investors at the right time with the right return profile across asset classes. Tracking investor returns provides an important pulse on the various economies of the region,” she added.
Based on SICO’s analysis, private equity is the asset class that required the highest returns (over 14pc) among all asset classes included in the survey, while investors across the GCC require the lowest returns from cash deposits in local currencies, compared to other asset classes surveyed.
Bahrain was the only country in the GCC where 30pc of investors expected returns above 3pc on cash deposits.
Required returns for listed equities in Saudi Arabia, UAE, Bahrain and Oman lie within the 6-8pc range, whereas investors required higher returns on their equity investments in Qatar 9-11pc and Kuwait 6-11pc.
Required return in Bahrain, Kuwait and Saudi Arabia for real estate lies between 6-8pc, while a higher return of 9-11pc is required from Qatar, Oman and UAE.
As for 10-year government bonds, required returns for Bahrain and Oman stood between 6-8pc, while lower returns (3-5pc) were expected for the rest of the GCC countries.
