Alkhabeer Capital, a leading Saudi investment company, has released its latest global economic outlook for 2012.
At the same time, regional inflation is also expected to ease as commodities and global growth flattens during 2012.
Alkhabeer Capital believes that Saudi Arabia will emerge as the leading Frontier economy with a lower debt profile (total debt 58% of GDP), higher investment (23% of GDP) and rising infrastructure spending.
Saudi Arabia’s growth is mainly derived from an expected jump in budgetary development spending (up 16%) as an outcome of USD 133 billion economic stimulus package announced by the government. Al-Khabeer’s forecast for Arabian crude for 2012 has taken into account a 5% decline in prices along with a 2% appreciation for USD.
While an investor in a Frontier economy is concerned primarily with currency movement and inflation, Saudi Arabia is unique because its peg with the USD means stable currency while monetary measures – money supply – is used to ease imported inflation. Based upon Alkhabeer Capital’s oil price outlook and past Saudi Central Bank measures, it can be concluded that 2012 inflation is unlikely to exceed 4%.
Saudi equities are also expected to project good returns with modest risk. Trading at a PE of 11.5 and yielding 3% dividend, Saudi equities are the best pick amongst Frontier world with a price appreciation potential of 17%.
Europe is expected to shrink by 0.6%, USA unlikely to post higher than 1.5% growth and the Emerging world likely to post 5.1% growth; the global economic growth is expected to close around 2.5% for the year 2012, wherein China may contribute more than 40% of total global economic growth.
After reviewing all the asset classes and taking into account economic growth estimates, Alkhabeer Capital concludes that bargain hunting in equities is likely to generate the most optimum return depending on the investors’ appetite for risk.
Trading at a PE of 10.5 and yielding 3% dividend, UK equities are likely to be the best pick amongst the Developed world, with a price appreciation potential of up to 30%.
Trading at a PE of 9.5 and yielding 2% dividend, Russian equities are expected to be the best pick amongst Emerging world, with a price appreciation potential of 32%.
Trading at a PE of 11.5 and yielding 3% dividend, Saudi equities are the best pick amongst Frontier world, with a price appreciation potential of 17%.
Based on our global growth expectations, we believe that sectors which are domestically focused such as Cement, Food and Retail are likely to be outperformers this year.
Alkhabeer Capital recommends high dividend Kuwaiti stocks, selected equities in Omani hospitality & logistics sector and Qatari equities.
Slower growth in consumption, higher growth in supply and lesser depreciation in the value of currencies suggest medium to long term outlook for commodities at flat to negative.
Based upon additional supplies, a modest appreciation in the US dollar and a slowdown in global consumption growth, Alkhabeer Capital expect oil prices to shrink by 5% in 2012.
“I am delighted to announce our 2012 Economic Outlook written by our in-house research team, which identifies a range of investment opportunities both regionally and globally where investors can still secure a return on their investments,” Ammar Shata, Executive Director and CEO of Alkhabeer Capital, said.
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“We specialize in providing our institutional and high net worth client base with the most in-depth investment advice possible, which combines our global investment perspectives with our regional in-depth expertise of Sharia’a compliant investments,” he said.
“I am therefore delighted to release our 2012 Economic Outlook report, which outlines our investment thoughts for 2012 and look forward to providing further investment insights in the year ahead.”