Arab Financial Markets Flourish in 2023: A Year of Growth and Resilience
In the realm of Arab financial markets, the year 2023 proved to be a year of remarkable developments and growth. The annual report issued by the Union of Arab Securities Authorities highlighted several key points that shaped the financial landscape in the region.
One of the standout features of the year was the significant improvement in stock prices across regional markets. Traded stock prices experienced substantial growth, particularly in the last two months of the previous year. This surge was driven by expectations of interest rate reductions by central banks in 2024, in response to easing inflationary pressures worldwide.
Global and regional markets both saw gains exceeding 10% throughout 2023, reflecting growing confidence in decision-makers’ vision and their ability to implement policies that mitigate economic downturns. Arab financial markets, especially in Gulf countries, attracted additional capital through successful offerings, stimulating trading activity and bolstering overall performance.
However, the year did not start on a positive note, as Arab markets faced a shaky start due to challenging conditions in the initial five months. The Arab Standard & Poor’s Composite Index declined by 4.1% in February, reflecting the tough start to the year for markets in Egypt, Saudi Arabia, the UAE, Qatar, Kuwait, Jordan, and Tunisia.
The global impact of the downturn at the beginning of the year was felt beyond Arab markets, affecting global counterparts as well. Concerns over the US Federal Reserve’s tight monetary policy, including interest rate hikes, contributed to market volatility.
Despite severe losses in stocks and financial bonds across the United States, Europe, and Asia, regional markets managed to show resilience amidst losses. In the third week of the current month, Arab markets saw a slight increase of 0.9% in stock prices.
As the year progressed, Arab financial markets concluded on a positive note, with impressive performance gains in November and December. These improvements were driven by expectations that interest rates had peaked, coinciding with a slowdown in US inflation rates.
The combined market capitalization of Arab stock markets reached $4.5 trillion in December 2023, marking a 12.2% increase compared to the previous year. The surge was primarily fueled by the “Tadawul” market in Saudi Arabia, which saw a 14% rise to reach $3.002 trillion in 2023.
The Egyptian Exchange witnessed substantial growth, with traded stocks recording a remarkable 95.8% rise, reaching $110.7 billion. This surge was influenced by increased trading value following the introduction of treasury bill trading.
The Morgan Stanley MSCI Emerging Markets Index highlighted the Egyptian stock exchange’s impressive performance, showing a 41.8% improvement during the past year. Morocco and Lebanon also saw significant improvements in their market performance, with Morocco’s index rising by 22.8% and Lebanon’s index closing the year with an impressive increase of 47.4%.
The report also highlighted the sector breakdown in the region, with the energy sector holding the largest share of market capitalization at 50.9%, followed by the financial sector at 16.8%, the consumer sector at 8.7%, and the basic materials sector at 6.1%.
Overall, 2023 was a year of growth and resilience for Arab financial markets, with positive trends and developments shaping the economic landscape in the region. Investors and analysts are optimistic about the future outlook for Arab markets, as they continue to attract capital and show strong performance in the face of global challenges.
