The GCC, the United States, and India are emerging as key engines of global economic growth, while many other economies navigate more complex challenges, said Manpreet Gill, Chief Investment Officer, AMEE at Standard Chartered Bank.

 

Speaking on the sidelines of a high-level investor meeting organised by Standard Chartered Bank in Bahrain, Gill provided insights into the broader global economic landscape.

 

He highlighted Bahrain’s strong investment potential, attributing it to the kingdom’s diversified economy and financial stability, which continue to enhance its appeal to both local and international investors.

 

Addressing global trade concerns, Gill acknowledged the lingering risk of escalating international tariff disputes but noted that, so far, tariffs have not reached a level of unexpected intensification. However, a cycle of retaliatory measures among global markets remains a risk.

 

Emphasising the importance of a diversified investment approach, Gill said: "Investors should adopt a globally diversified investment strategy rather than concentrating solely on local markets. While it is natural to prioritise familiar markets, an optimal investment portfolio should integrate both local and international assets, ensuring a balanced approach that enhances return potential while mitigating against a much wider range of risks."

 

Flexibility of GCC capital markets

Gill highlighted that inflationary pressures and geopolitical shifts remain among the most significant challenges facing Gulf financial markets today. The evolving global landscape raises critical questions about how these factors influence the regional business environment. From a capital markets perspective, uncertainty and volatility are inherent, yet they do not necessarily warrant disengagement from investment activities. Instead, financial markets typically prioritise long-term economic trends over immediate political developments.

 

Drawing on five decades of historical data, Gill emphasised that while geopolitical events can trigger short-term market fluctuations, they rarely cause prolonged disruptions unless they directly impact commodity supply chains or essential financial assets. One example is South Korea’s equity market, which has endured three decades of military tensions with North Korea, including missile tests and maritime incidents. Despite these geopolitical shocks, market corrections have generally been short-lived, with recoveries occurring within a month and the focus returning quickly to the fundamentals of economic and earnings growth.

 

This trend applies to most global financial markets, which typically experience volatility only when fundamental economic indicators — such as GDP growth or corporate profitability — are materially impacted. While short-term fluctuations are inevitable, they do not significantly alter the long-term investment landscape.

 

The Gulf region was highlighted as a strategic growth hub in the global economy, with growth increasingly driven by the expansion of non-oil sectors, particularly in Saudi Arabia and the UAE. The robust performance of non-oil GDP strengthens economic sustainability across the GCC, positioning the region as a vital engine of global economic growth. 

 

Gill further noted that the GCC economies, alongside the US and India, are among the primary contributors to global economic expansion.

 

Liquidity and market Listings in Gulf

Regarding the future of listings in Gulf capital markets, Gill highlighted the rising number of initial public offerings (IPOs), particularly in the UAE, where many companies are seeking to go public and attract investors. 

 

He noted that the trend of more companies and sectors listing in public markets is not only an effective strategy for firms looking to raise capital, but also it increases market depth and options available to investors.

 

The region will likely experience new waves of listings in the coming years, supported by sustained economic activity, which will create attractive investment opportunities for both local and international investors. The investors are advised to remain vigilant in this evolving economic landscape and to adopt balanced investment strategies that integrate both local and global opportunities to ensure long-term sustainable returns.

 

The surge in IPO activity in the UAE stock market was also highlighted, reflecting not only the expansion of businesses but also their increasing ability to raise capital. This trend underscores the strong liquidity available in the market to support these offerings.

 

In the same context, Gill emphasised that part of this momentum is driven by capital flow dynamics, and cited the Saudi market as a prime example, attracting substantial liquidity due to its historical market size and depth. The economic conditions also play a crucial role in shaping market activity, with stock markets in high-growth regions — such as the United States, India, and the Gulf — demonstrating robust performance and heightened investor interest.

 

Interest rates and inflation

He highlighted that global bond yields present a valuable opportunity for long-term bond investments, as they offer fixed returns over extended periods — particularly advantageous if interest rates continue to decline as against just holding cash deposits. Global equities, particularly US stocks, should remain a cornerstone of any well-diversified investment portfolio due to their strong growth potential amid inflation.

 

There are also expectations that major central banks, including the US Federal Reserve and the European Central Bank, will continue to cut interest rates in the near future, albeit at different paces.

 

“In the United States, we anticipate two to three more rate cuts, provided inflation remains subdued. In contrast, Europe has greater flexibility for rate cuts due to weaker economic growth and lower inflation. Meanwhile, Japan stands as an exception, as it is expected to hike rates amid rising wages and increasing inflation—an encouraging sign after decades of economic stagnation and deflation.”

 

One key metric under close observation is the interplay between inflation and consumer spending. With inflation levels between 2.5% and 4%, companies can generally pass higher costs onto consumers without significantly denting profitability. However, when inflation surpasses 4%, consumer caution escalates, pressuring corporate earnings and potentially triggering a downturn in stock performance. For now, inflation in the US remains under control and it’s predicted that the global disinflationary trend will persist, fostering a more stable investment environment.

 

Investor strategies and asset allocation

Gill outlined various investment options, emphasising that gold remains a crucial asset, particularly during periods of global economic uncertainty. Most investors allocate between five to seven percent of their portfolios to gold as a hedge against volatility and inflation.

 

The appeal of Sukuk for investors seeking Shariah-compliant financial instruments was also highlighted, particularly in the Gulf region, where demand for such investments continues to grow.

 

Regarding cryptocurrencies, Gill acknowledged the sharp divide in investor sentiment. While arguments exist that some digital assets can present investment opportunities, many remain highly speculative and carry significant risks.

 

Gill also addressed one of the primary challenges faced by startups in the region: cash flow and liquidity management and said that many startups launch with strong momentum but struggle to sustain operations due to liquidity shortages. To mitigate this risk, startups could diversify their funding sources and explore options such as venture capital, initial public offerings, or strategic partnerships.

 

Saudi Arabia and the UAE provide substantial funding opportunities for startups, encouraging entrepreneurs to broaden their outlook and explore funding prospects across the region to ensure business sustainability and long-term growth.

 

Promising investment sectors 

Gill highlighted that technology remains the leading sector for investment but noted that opportunities extend beyond just the major technology firms. The focus in 2025 is shifting toward a broadening out of the equity rally to other high-growth sectors, particularly financial services, which have demonstrated strong performance in the United States.

 

The continued importance of sustainability and renewable energy was stressed, driven by significant global investments in clean energy infrastructure. Countries such as India and China are at the forefront of this transformation, making the sector a key area for long-term investment.

 

On a broader level, Gill emphasised the importance of maintaining a mindset of thoughtful optimism in 2025. While markets inevitably experience volatility, history has shown that some of the best investment opportunities arise during uncertain periods and affirmed that investors who develop a clear strategy and are prepared to act at the right moments will be well-positioned to capitalise on emerging opportunities.

 

It was further noted that financial markets tend to reward those who recognise potential amidst challenges rather than those who focus solely on risks and urged investors to adopt balanced strategies that integrate both local and global investment opportunities to ensure sustainable long-term returns.

 

US economic momentum and global growth factors

The global economic landscape in 2025 remains heavily influenced by developments in the United States, which continues to be a central driver of worldwide economic momentum. Another year of strong performance is expected, outpacing many other global markets. This resilience is attributed to the carryover momentum from the previous year, coupled with the impact of ongoing economic policies.

 

US economic policy presents a combination of supportive and restrictive factors. For example, while tariffs and tighter immigration policies create barriers to growth, tax cuts and deregulation stimulate business activity. Given these dynamics, there is a strong possibility that economic expansion will exceed expectations, reinforcing the country’s role as the primary engine of global economic growth.

 

At the same time, challenges persist in Europe, particularly due to weaker demand from China. A slowdown in Chinese consumer spending, combined with a lack of substantial stimulus measures, has contributed to sluggish European growth.

 

Inflation remains the key variable to watch, as it directly influences the sustainability of economic expansion. Stronger growth increases the need for careful monitoring of inflation trends and monetary policy decisions. Additionally, rising tariffs could further exacerbate inflationary pressures, complicating the Federal Reserve’s future policy direction.

 

Another critical question is whether US equity markets are currently overvalued. While market valuations, as measured by price-to-earnings (P/E) ratios, appear high, historical data — particularly the cyclically adjusted price-to-earnings (CAPE) ratio — indicates that valuations remain within a range that has historically delivered positive returns. The stock market is currently pricing in earnings growth of 14–15%, and even if this target is not fully met, it would still be sufficient to sustain strong market performance. Although valuations are elevated, they have not yet reached levels that pose a significant risk to market returns from here.

 

Beyond the US, India continues to gain prominence in the global economic landscape. Strong domestic demand, coupled with increased government investment in infrastructure, serves as a key driver of expansion, further reinforcing the country’s role in global economic growth and as an attractive equity market, he said.

 

Renewable Energy, a strong investment

Gill affirmed that the appeal of renewable energy investments remains intact, particularly in countries with ambitious clean energy targets such as China and India. These nations continue to advance their renewable energy strategies, recognising that sustainability in energy production is only achievable through long-term commitments to green infrastructure.

 

The transition to renewable energy is not an overnight shift but a gradual process requiring a balanced approach between traditional and renewable sources. This transition is unfolding worldwide, as economies seek to integrate clean energy solutions without disrupting existing supply chains. The declining costs of solar and wind energy have significantly enhanced their competitiveness compared to fossil fuels, reinforcing the momentum behind renewable adoption regardless of short-term policy fluctuations.

 

Even with certain trends in the US leaning toward expanding oil and gas production, the success of industry leaders such as Tesla highlights the enduring relevance of clean energy investments. The growing competitiveness of electric vehicles and renewable technologies underscores that clean energy remains a vital and evolving sector, positioning itself as a cornerstone of future economic growth, he said. - TradeArabia News Service