Equity Weekly - 26 August 2024

Global equities continued their momentum from the previous week as the Fed Chair Jerome Powell confirmed the pivot at his Jackson Hole speech by saying “will do everything we can to support a strong labor market”. Overall, the MSCI World index added +0.9% 5d on the back of continued strength in developed markets. The MSCI G7 index added +0.8% 5d even as the MSCI EM index dropped -0.3% 5d.

It is likely that more than the economic data, the focus of investors this week would be on Nvidia earnings. More so given that it has been a rather disappointing earnings season for major technology companies. Investors are also likely to keep an eye on consumer related economic data from the US towards the second half of the week.

Emerging market equities (i.e., MSCI EM index) are trading at the steepest discount of 45% relative to US equities (S&P 500 index) since the pandemic. It appears that weakness in the currency coupled with potential trade tariffs post elections in the US are weighing on investor sentiment.

The MSCI EM index has added +7.5% ytd relative to the 16.8% ytd gain in the S&P 500 index. The MSCI EM index is trading at 12.1x 12m forward PE multiple versus the S&P 500 index which is trading at 22.2x 12m forward PE multiple.

Chart of the Week – Emerging market equities relative valuation falls to their lowest level since the pandemic

Source: Bloomberg

MENA Equities

Regional equities followed the global trend and closed higher. The S&P Pan Arab Composite index added +2.0% 5d. The Bahrain Bourse index was a notable exception with a drop of -0.7% 5d.

Saudi Telecom (+12.2% 5d) was among the best performers for the week after the Company announced plans to boost quarterly payments to SAR 0.55 per share for the next three years starting in Q4 2024 and also said that it may consider special dividends.

Other major telecom companies i.e., Etisalat and du have traded mixed with losses of -10.2% ytd and +19.5% ytd respectively. Etisalat and du are trading at a 2024E dividend yield of 4.7% and 6.5% respectively.

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