Rating agency Moody’s has warned that asset managers based in the Gulf Cooperation Council (GCC) face “moderate to high” pressure on their profits over the next 12 to 18 months due to the double impact of the Covid-19 pandemic and the worldwide fall in oil prices.
Weak oil prices will hold back economic growth and public spending which will have negative consequences for asset managers, states the report. It also refers to the recent increase in tensions between the US and Iran which could damage investors’ confidence in the region.
However Moody’s also highlights a number of potentially mitigating factors, such as GCC governments’ plans to privatise some state assets, changes in regulation to attract more foreign investors and the inclusion of Saudi stocks in the MSCI emerging stock market index.
As GCC markets continue to open up to foreign investors, there is a great opportunity for local asset managers to capitalise on their expertise, states Moody’s.
“The sector's relatively low geographic and product diversification and regional geopolitical tensions will add further pressure,” said Vanessa Robert, vice president and senior credit officer at Moody's.
“Still, an improving regulatory environment and growing interest from foreign investors will provide some counterbalancing uplift.”
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