The war in Gaza brings to mind images of a Middle East mired in bloody and irresolvable conflict. But not everywhere.
Once a conservative bulwark, Saudi Arabia has become one of the world’s most rapidly changing societies, with economic ambitions to match. Under Mohammed bin Salman’s de facto leadership, employment for women has doubled and previously non-existent entertainment and leisure industries have come back to life.
The Saudi exchange has hosted 70 initial public offerings since the beginning of 2022, said Emre Akhçamak, a senior consultant at Dubai-based East Capital. “His 10 years in this market have seen 50 years of progress,” he enthuses.
Six years after the assassination of dissident journalist Jamal Khashoggi, MBS, known as the 38-year-old crown prince, appears to be an adult in the geopolitical room. Riyadh has dangled increased defense cooperation with the United States, while retaining China as its biggest oil customer and restoring diplomatic ties with regional rival Iran. JPMorgan’s David Aselkov says prudent investors can capitalize on this positive momentum.
‘s
Emerging European and Middle East equity strategist. “Investors are looking for companies that can deliver double-digit earnings growth, and they’re finding them,” he says.
Riyadh’s flagship Neom project has brought a crop of derisive headlines, with its nominal price ballooning from $500 billion to $1.5 trillion. The future housing complex, known as The Line, will be shortened from 165 miles long to less than two miles by 2030. This obscures the real growth spurred by MBS’s social liberalization and the young population (average age 31) rushing to take advantage of it.
Advertisement – SCROLL TO CONTINUE
The International Monetary Fund predicts that Saudi Arabia’s non-oil economy will grow by 4% annually over the next decade. Shares in gym operator Rejam Sports have soared 85% in the past 18 months. IT consultancy Elm has racked up government digitization contracts, causing its stock price to more than double.
Akkakmak added tourism stocks such as Budget Saudi Arabia (ticker: 4260.Saudi Arabia) and private education providers such as Attaa Education to his list of new economies to watch.
Saudi Arabia is also rapidly gaining attention in the bond market, for better or worse. Saudi Arabia, which issued its first eurobond in 2016, has grown to 9% of the world’s emerging market sovereign index and is borrowing to finance economic transformation, says T. Rowe Price emerging market sovereigns analyst. , points out Razan Nasser. “It’s too early to tell” whether MBS’s grand vision will be a success, she says.
Advertisement – SCROLL TO CONTINUE
Meanwhile, interest rates on Saudi Arabia’s 30-year government bonds are nearly 2 percentage points higher than comparable U.S. bonds, as Riyadh’s debt remains less than 30% of its gross domestic product and its foreign exchange reserves are around $440 billion. Not the worst bet.
No one would say that MBS’s Saudi Arabia is completely stable. His hasty modernization could still provoke a domestic backlash. “According to one very good source, everyone under 35 loves MBS, and everyone over 35 hates MBS,” said Simon, director of Gulf and energy policy at the Washington Institute. Henderson says.
Iran still faces serious external threats, is inching toward developing nuclear weapons, and faces an uncertain leadership succession. A stronger US defense umbrella could be conditional on recognizing Israel, a step that is impossible for MBS in the current situation. “The Middle East has an imbalance of internal power and the potential for turmoil is very high,” said Matt Gerken, geopolitical strategist at BCA Research.
Still, a time traveler from 10 years ago would be surprised by today’s Saudi Arabia. “His MBS at this point is within the broad range of success,” Henderson concluded. “There are still many ‘buts’ in the world.”