TLDR:
Saudi Arabia expected to remain resilient
South Korea downgraded amid profit concerns
Emerging market stocks likely to struggle
RIYADH (The Thursday Times) — Citigroup has raised expectations for Saudi Arabia’s resilience amid anticipated challenges for emerging market stocks, as Donald Trump’s victory in the U.S. election stirs economic uncertainty. Analysts highlight Trump’s expected trade policies and a stronger U.S. dollar as potential drags on global growth, placing emerging markets under pressure while shifting Citigroup’s outlook on specific countries. Saudi Arabia and India are seen as less exposed to trade risks; however, while Saudi’s rating was upgraded, India faced a surprising downgrade due to slowing earnings growth and recent foreign investment shifts spurred by China’s economic policies.
Unsettling emerging markets
Citigroup’s recent forecast presents a cautious view for emerging market stocks, with the expectation that Trump’s policies could weigh on global economic momentum. A projected stronger U.S. dollar could tighten conditions, impacting emerging economies reliant on trade. Citigroup’s analysis underscores heightened volatility in the face of anticipated U.S. trade policy changes, which could limit growth potential for key markets. Emerging markets, particularly those heavily dependent on exports, face an uncertain environment with added vulnerabilities due to the dollar’s strength.
Saudi Arabia, upgraded
Saudi Arabia emerged as a bright spot in Citigroup’s report, with the top oil exporter upgraded to “overweight.” The country’s lesser exposure to global trade risks, along with a stable oil market outlook, contributes to its improved rating. In contrast, India’s rating dropped to “neutral,” attributed to the slowdown in earnings growth and heightened market volatility amid China’s economic moves. The shift reflects Citigroup’s view that, despite strong fundamentals, India’s stock performance could face hurdles from profit stagnation and foreign capital outflows.
Selective growth forecasts
While Citigroup highlights challenges for emerging markets overall, selective upgrades point to potential growth in specific regions. South Africa, for instance, received an “overweight” upgrade due to anticipated profit growth and expected support from China’s stimulus measures. Meanwhile, South Korea faced a downgrade to “underweight,” with concerns over reduced corporate profitability and trade policy uncertainties likely to dampen economic performance. Although a rise in semiconductor earnings could bolster Korea’s KOSPI index, Citigroup warns that the broader impact of trade tensions could strain exports, especially to the U.S.
