Oil prices are expected to remain in the range of $61 to 65 a barrel this year, unchanged from 2019, Markaz Research has said.
Also, Markaz Research sees moderate improvement in GCC corporate earnings and non-oil sector growth supported by government spending.
Consequently, Markaz Research remains “neutral” in its outlook for GCC Equity market for 2020.
The outlook, it said, is based on evaluation of the countries across four key parameters — economic factors, valuation attraction, corporate earnings growth potential and market liquidity.
“Economic conditions in the Gulf region are expected to moderately improve in 2020. As muted oil price outlook indicates lower oil GDP growth, GCC governments' expansionary spending is expected to aid non-oil economic growth while global economic conditions also seem conducive,” Markaz said in its ‘GCC market outlook 2020’.
Growth in the overall corporate earnings for Gulf Co-operation Council countries is expected to be modest for 2020. Banking sector is well placed to support corporate earnings growth.
While expectations of profit realisation and credit growth remain, profitability might be under slight pressure because of lower interest rates.
Real estate and construction could perform slightly better in 2020 given the measures taken by different stakeholders and the proposed government spending, it said.
Commodities are expected to perform moderately better with phase one of US-China trade deal agreed upon and decisive UK elections supporting quicker resolution of Brexit issue.
Following Kuwait's MSCI upgrade scheduled for May 2020, it is also expected to post a higher P/E with increased fund inflows.
Markaz noted, “As we step into 2020, the outlook for GCC fixed income asset class looks promising. High positive yields, better risk-adjusted returns, currencies that are pegged to dollar and improving credit quality on back of rising oil prices augur well for their improving stance.
“On the other hand, investors are wary if the increasing oil prices could lead to a sense of complacency on the reforms front. Alternatively, prudent fiscal management measures for Oman and another GCC country would be watched keenly.”