Report prepared by KAMCO Research
A decade since the global financial crisis
10 years from the Global Financial Crisis (GFC), the global economy has recovered, as nominal GDP is slated to grow at a CAGR of 3.2% from $63.72 trillion in 2008 to $87.51 trillion in 2018. Emerging Markets have contributed more than 64% of the increase over the period, as per our analysis of IMF data. Post the stock market crash of 2008, global stock markets erased losses and almost doubled over the next 10 years, as the market cap of global equities grew by 93% from $41.45 trillion in Sept-2008 to $80.13 trillion in Septeber 2018. The nominal GDP of GCC economies is set to grow to $1.6 trillion in 2018 from $1.2 trillion in 2008, despite being confronted by the changing landscape in oil markets and oil price volatility. While in 2008, the region’s oil revenues were more driven by global demand, now in 2018 supply side economics remain the most important talking point. Initiatives to shore up fiscal balances and transform economies in the GCC are now paramount, as the fiscal breakeven oil price of major oil producers in the region (Saudi Arabia, Kuwait, UAE, Qatar) are higher by 120% on average.
GCC equity markets also improved from their lows of 2008, as total GCC market capitalization in Sept-2018 is higher by over 68% at $ 1.03 trillion compared $0.61 trillion in September 2008. However, trading activity has progressively declined, as value traded on GCC indices fell from over $855 bln in 2008 to $304 bln in 2017. We expect trading activity to improve from 2019 onwards from higher passive and active flows from regional mandates, especially in Saudi Arabia and Kuwait, as indices witness upgrades in market status and feature in global index compilers.
IPO market activity in the region dwindled in 2017 as capital raised reached $3.2 bln, down 71% from activity in 2008. On the other hand, capital raising activity through debt issuances stands more than 6.8x from 2008 to reach around $123 bln in 2017, led by sovereign issuances of bonds and sukuks.