In this year-end commentary, we turn our gaze to how the Gulf equity markets have evolved since our last assessment in 2019. Much has changed, but the GCC is still underrepresented in key emerging market indices. We examine four key factors to support this argument - listings, foreign ownership limits, free floats, and index changes in country composition - and explain why we think the GCC’s underrepresentation will diminish.

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The most important determinant of a bank’s value is its long-term outlook for cost of funding. In this commentary, we evaluate demand-deposit growth in Saudi and the UAE and predict its future trajectory. For comparison, we look at historical data from the US and more recent data from other advanced non-Gulf countries.

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Dubai has experienced significant changes over the past 15 years. In this commentary, we share our experiences and those of friends to add to the picture of Dubai’s progress captured in the financial data.

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Investing in government-related entities (GREs) is unavoidable in the Gulf. However, they often trade at a lower value compared to non-GREs. In this commentary, we explore reasons for this.

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Investors often focus on short-term market performance and neglect to consider longer term potential determinants of company values. In this year-end commentary, we examine one such determinant: the 10-year US Treasury bond yield. We compare the yields in the 1970s and early 1980s with those of today and examine what the differences indicate about investors’ assumptions on inflation.

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A widely held view among the investment world is that the value of growth companies falls much more than value companies in an inflationary and, consequently, rising interest rate environment. In this third commentary of 2022, we explain why this view is overly simplistic and examine three crucial value drivers: return on equity, net income growth and discount rates.

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Environmental, social and governance (ESG) factors are receiving increased attention by investors. However, determining the best way of addressing ESG is complex. In this commentary, we focus on the “E” component, discuss the three main ways to integrate environmental considerations into the investment process, and explain our current approach.

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For this year’s first commentary, we use the Buffet indicator to understand the valuation of the large telecom and financial sectors within each Gulf country and to compare these valuations with a broad range of other countries. We also share where we see current market values potentially going based on free cash flow growth and discount rates.

For more information, please contact us at: info@introspectcapital.com