A Guide To West Asian Risks In 2020

Geopolitical risk has not disappeared, says Citigroup

- Netty Ismail

If 2019 was the year when a clutch of West Asian markets burst into the mainstream, then 2020 will test whether the foreign money keeps flooding in. The year opened with five Gulf Arab economies joining JPMorgan Chase & Co’s emerging market bond indices.

The spotlight stayed firmly on the region as Saudi Aramco’s $12-billion international bond début in April was followed by preparations for its historic public offering at the end of the year.

Gulf dollar bonds outperformed their emerging-market (EM) peers with returns of 15 per cent this year.

At the same time, drone and missile strikes on Aramco’s facilities in September served as a reminder of the region’s political fault-lines and the potential pitfalls investors face.

“Geopolitical disruption risk has not disappeared,” Citigroup analysts including Edward Morse wrote in an emailed note. The headwinds have been “heavily discounted by markets, which look to us to be more vulnerable to disruption” than before the Aramco attack, they said.

Here’s a list of some of the biggest risks investors will be watching next year:

Gulf rift