Executive Summary
Kuwait outperformed other GCC markets in January 2025, supported by the optimism about the new government and its thrust on project spending. The GCC banking sector remains fragmented, with the presence of a few banking giants and several smaller banks. Therefore, the possibility of consolidation beckons, as that would be one of the most viable options to achieve reasonable scale and compete with larger banks. Low liquidity and low active fund manager participation in GCC markets has become a chicken and egg problem, with one becoming a consequence of the other. Given that Trump’s policies could strengthen the U.S. Dollar further, GCC markets could be a stable option for fund managers within the Emerging market space considering the low currency risk that they offer. In addition, GCC stocks outperform most other emerging markets on dividend yield and return metrics GCC telcos have started expanding their presence to Europe. Their choice to consider Europe rather than the MENA region could be to balance currency risk, which was observed in the case of GCC banks that had increased their presence to other MENA countries. The emergence of Deepseek could have a material impact on future energy demand and a range of related industries if their claims of lower energy usage turns out to be true. Nevertheless, more efficient AI models could lead to higher usage, which could in turn be energy accretive.
