Saudi Stocks May Turn Into Good Reflation Bet, Julius Baer Says

Investors looking for emerging-market opportunities to capitalize on the expected global economic rebound should take a look at Saudi Arabia’s equities, according to a strategist at Julius Baer Group Ltd.

Saudi shares “could benefit from the reflation trade, especially with oil moving higher,” said Mathieu Racheter, an equity strategist for emerging markets at the Swiss firm, which has $486 billion in assets under management.

The Tadawul All Share Index has lagged the rebound in the MSCI Emerging Markets Index since last year’s pandemic-spurred rout. Still, it rose for a fourth straight day on Tuesday, climbing to a three-week high as oil headed above $60 a barrel on signs the global market is tightening and demand is improving.

Saudi Stocks May Turn Into Good Reflation Bet, Julius Baer Says

Racheter said it wouldn’t be surprising to see some profit-taking in global equity markets after the recent strong gains. “But we would see this as a buying opportunity, we would buy in the dip,” he added.

Shares in China, South Africa, Brazil and Russia also stand out in the near term when considering value stocks, he said. Read more from the interview:

  • Asia remains the focus for growth stocks, particularly China. South Korea’s market also stands out, as it is driven by semiconductors, chipmakers, “and we believe that chip prices have bottomed and are poised to climb again.”
  • Remains positive on Vietnam, an “interesting frontier story” that could eventually be upgraded to EM by the major index providers such as MSCI Inc. and FTSE Russell.
  • Turkey is an attractive market since the change in management of the central bank, and trade cheap versus historical average. “We are seeing good signs, but would not rush in.”
  • Brazil could become more interesting if government manages to provide tough fiscal responsibility and moves back to economic reforms.
  • EM technology stocks still offer some value despite being a consensus call for “for quite some time,” as big EM tech shares trade cheaper than those in developed markets.

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