- GCC countries have their currencies pegged to the USD and they export two major things: energy and capital
- Inflation in Western countries hurts GCC countries because they are net importers of goods from Western countries, however, interest rate increases have a beneficial net effect on GCC countries because they export capital, hence they get higher return margins
- GCC banks, which is a major sector, have benefited from interest rate increases thanks to increased net interest margins (NIM). On the other hand, despite high interest rates, real estate prices and demand for it remained quite high, even though we would have expected this sector to suffer
- We remain positive on GCC countries thanks to low relative debt-to-GDP, high reserves, continuous reforms and relentlessly growing economies
- GCC stock markets could pull back should the current war in Gaza expand regionally, mainly because retail investors and foreign investors could pull out, even though we believe the direct fundamental impact would be limited, unless oil exports are disrupted due to geopolitics
