The economies of the GCC region – which includes Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, and Oman – are projected to grow at around 4 per cent per annum over the next five years, more than double the GDP growth rate of advanced economies.
According to the fund manager, this growth will be driven not only by the region’s dominance in global energy markets but mostly thanks to government-led initiatives, such as the vision plans launched by each country. These initiatives aim to reduce reliance on oil and gas industries.
“The vision plans are key drivers of the GCC’s transformation. These plans encompass a wide range of objectives, including developing non-oil sectors, promoting private sector investment, and enhancing social and environmental sustainability,” SSGA stated in its Global Market Outlook 2025: Finding the Right Path.
Moreover, investors can participate in the growth of new sectors through IPOs, which are expected to play a crucial role in the “diversification efforts”.
SSGA also anticipates the development of ETFs focused on GCC equities and bonds in the near future.
The region’s equity markets have evolved from limited access to greater global integration and, as a result, the GCC countries have been included in the MSCI Emerging Markets (EM) Index and MSCI All Country World Index (ACWI),
“While the GCC’s representation in the EM index has increased considerably, the region remains underrepresented in global indices, suggesting potential for further growth,” the fund manager said in its outlook.
As far as the sectors are concerned, financials dominate the region’s equity markets but SSGA expects sectoral concentration to shift as diversification efforts gain momentum. According to the fund manager, investors are likely to find more opportunities in areas such as healthcare, education, smart infrastructure, renewable energy, and technology.
GCC equities
The fund manager emphasised that the GCC equities, which have consistently outperformed the broader emerging markets index over the past decade despite challenges, are less dependent on the region’s traditional dominant industry.
“What may be surprising for some is that GCC equities actually exhibit a lower-than-expected correlation with oil prices – relative outperformance is attributed to the region’s resilience and strategic efforts to diversify its economic base and equity markets,” the fund manager highlighted.
“A key draw for global investors is the low correlation of GCC equities with both developed and emerging markets, as the region’s distinct sectoral exposure differs significantly from technology heavy global markets.”
SSGA also emphasised that one of the factors making these markets attractive for investors is the lower currency risk, given the stability of its dollar-pegged currencies.
Fixed income
The diversification efforts and government plans are expected to drive substantial fixed income issuance to fund growth initiatives.
According to State Street’s data, the total amount of outstanding bonds issued by GCC countries has more than tripled since 2019, reaching close to US$1.35 trillion as of September.
The fund manager noted a surge in local currency bond issuance, which indicates a deepening of local bond markets.
A key attraction for investors is the outperformance of GCC bonds relative to the broader JP Morgan EMBI Global Diversified Index over the long term. Additionally, the GCC bonds displayed lower volatility and drawdowns compared to other emerging markets.
“Looking forward, the GCC region offers growth potential, diversification benefits, and evolving sector dynamics,” SSGA noted.
“Challenges such as liquidity constraints and a volatile geopolitical landscape should be noted, but the GCC’s ongoing transformation and integration into the global financial system make it an investment destination worth considering for any well-diversified portfolio,” the report concluded.
