The year 2023 may be one of the strangest years ever in financial markets with some recording sharp fluctuations and others achieving unexpected gains, all linked to interest rates and geopolitical turmoil, which had a significant impact on the performance of global markets.
In Saudi Arabia, 2023 witnessed instability in the performance of the general index, which fluctuated up and down.
During the first four months of 2023, the index’s performance was poor, recording a low level of 9,976.65 points on March 16, while it witnessed a recovery in late July, recording the highest level of the year at 11,906.13 points on July 26.
Financial advisor Mohammed al-Maymouni described 2023 as a year full of instabilities for financial markets in general, starting with external influences such as fluctuations in oil prices.
The US Federal Reserve decision and the increase in interest rates affected the markets’ decisions.
Maymouni told Asharq Al-Awsat that fixing interest rates during the last two quarters had a positive and clear impact on the Saudi and Gulf markets, but the events in Gaza in early October negatively affected the movement of financial markets.
However, the Saudi index consolidated again at 10,400 points due to the rise in the share prices of some companies and the provision of investment opportunities. The banking sector recorded sound results.
The expert explained that the Saudi market witnessed fluctuations during 2023, as the index ranged between 10,400 points and 11,900 points following several external events and factors.
The market went through other stimulating factors, namely the announcements of banking sector results, which diminished fears of the impact of raising interest rates on the real estate sector.
Also, Saudi Arabia has been selected to host Expo 2030 and World Cup 2034, which will positively impact the traders.
Maymouni further indicated that the presence of the Saudi market within the MSCI and the FTSE indices has a positive impact on the morale of foreign investors and pumped more money into the Saudi market.
Asked about his expectations for the market’s performance during 2024, Maymouni predicted the market would recover, especially for petrochemical companies affected by a price and product correction. He noted that operating costs are also forecast to drop, indicating that these factors would cause a positive reaction in the sector.
- Banking sector
Maymouni said 2024 will be a good year for the Saudi financial market unless new political events or new developments in the Middle East arise.
For his part, financial markets analyst Saad Al Saad told Asharq Al-Awsat that 2022 witnessed the beginning of the tightening monetary policy in hiking interest rates, which caused a series of declines in the stock market from levels of 13,949 points to 9,950 points.
He noted that the matter also affected the performance of the market in 2023, which witnessed fluctuations in different periods.
Al Saad added that geopolitical and economic events, such as the Russian-Ukrainian war, influenced market movement and trading volumes.
Fixing interest rates during H2 2023 contributed to the return of traders’ confidence in the financial markets, signaled an increase in trading, and reduced the negative impact of their high levels on the economy, said the expert.
Al Saad pointed out that the Saudi market is experiencing a reasonable period after the announcement of inflation data.
The recent statements issued in the US and the EU showed improvement compared to last year, as well as 2024, and it expects that it will witness a reduction in interest rates three times, and perhaps more than that.
He pointed out that the US Federal Reserve’s statement about reducing the interest rate will revive the financial markets and free them from interest restrictions and interest rates.
It will also reflect on investor confidence and push them towards pumping more liquidity into the financial markets, noted the expert, adding that this positive development will also affect the basic materials, banking, and petrochemical sectors.
It is expected that the positive effects will be reflected in the market’s performance during 2024, with its results starting to appear after March and June.
