RIYADH: Leading financial analysts from Morgan Stanley have admitted they got it “wrong” after Saudi stocks outperformed expectations over the past 18 months.
“MSCI Saudi Arabia has been the best performing major country -- in the world -- this year and was also one of the best performing last year,” Morgan Stanley analysts wrote in a note on Monday, double upgrading their recommendation on the country to overweight.
“Having been underweight since May 2020, we’ve clearly gotten this one wrong,” they said, according to Bloomberg.
The benchmark Tadawul All Share Index has surged to its highest since 2006 on the back of soaring oil prices and amid increased retail trading activity, and Morgan Stanley now thinks high Saudi valuations are here to stay as the market is more driven by earnings, which are forecast to grow.
While foreign positioning in the country remains low, it has started to pick up, the analysts also noted. They think that banks are the best play in the country.
Saudi Arabia has “one of the strongest transmission mechanisms of higher oil prices into economic activity of any country in the Eastern Europe, Middle East & Africa (EEMEA) region,” according to the analysts.
Its growth outlook seems structural and likely to last for several years, the analysts wrote in a broader note about the region, saying it’s poised to be a beneficiary of higher commodity prices.