“Saudi Sovereign Capital Can Still Finance the Cycle”: Samer Choucair Identifies the Sectors Attracting Capital
Investment leader Samer Choucair said the rise in Saudi Arabia’s business confidence index to 56.7 points in August, its highest level since the shock that followed the outbreak of the Iranian war, reflects the non-oil economy’s ability to recover part of its momentum. However, he cautioned that the improvement does not mean geopolitical, shipping and insurance risk premiums have disappeared.
Choucair said the index increased by a modest 0.3% in August after falling from 60.7 points in February to 52.1 in March. It then recovered gradually to 54.5 in April, 55.6 in May, 56.6 in June, 56.5 in July and 56.7 in August.
For Samer Choucair, the importance of the latest reading lies more in the direction of recovery than in its absolute level, particularly because confidence remains below the pre-war readings of more than 60 points.
“The limited increase in August matters more than the absolute level because it confirms that the confidence curve did not break after the shock,” Choucair said.
He added that institutional investors should distinguish between sectors capable of expanding on the strength of domestic demand and those that remain heavily exposed to elevated shipping costs, insurance premiums and disruption across maritime corridors.
Domestic Demand Is Carrying More of the Growth
The improvement in confidence comes against a mixed economic backdrop.
Real GDP contracted by 4.8% year on year in the second quarter, affected by an approximately 24.7% decline in oil activities, while the non-oil economy expanded by 0.6%.
At the same time, the non-oil Purchasing Managers’ Index rose to 53.8 in August from 53.1 in July, reaching its highest level in six months. Output accelerated and expectations for activity over the next 12 months improved, while consumer inflation remained at 1.8% in July.
Samer Choucair said the PMI provides a more detailed picture of the economy beneath the headline confidence numbers.
New orders increased for a fifth consecutive month, while export orders declined for a sixth month, suggesting that economic momentum is becoming increasingly dependent on domestic demand and government-linked projects rather than external demand.
That distinction matters for capital allocation.
Companies whose revenues are generated primarily inside the Kingdom may be better insulated from external disruptions than businesses whose margins depend heavily on international trade flows, imported inputs or vulnerable shipping routes.
Manufacturing, Services and Construction Lead the Allocation Case
Choucair identified manufacturing, services and construction as three of the most important areas for capital allocation.
Industrial confidence stood at 54.7 points in July, services at 55.3 and construction at 57.7. The construction index subsequently reached 55.4 in August, while building permits continued to show strong growth, rising 20.3% year on year in June.
For Samer Choucair, manufacturing tied to domestic demand and import substitution offers greater resilience in the current environment.
Industries that can replace imported goods with locally produced alternatives may benefit from both structural policy support and reduced exposure to disruptions in international logistics.
By contrast, import-intensive industries and companies exposed to high transportation costs require a larger risk premium because their profitability remains more sensitive to freight rates, insurance costs and imported raw materials.
Services continue to benefit from domestic consumption, travel, government services and the expansion of the digital economy, while construction remains supported by the continuation of major projects under Vision 2030.
Geopolitics Is Changing the Investment Map
Samer Choucair said the geopolitical shock has reshaped investment priorities inside the Kingdom.
Energy security, supply-chain resilience, domestic manufacturing and logistics corridors linked to the Red Sea are increasingly becoming part of the sovereign investment toolkit rather than simply operating considerations for private companies.
“Institutional investors begin building positions when a shock moves from being an unknown event to a variable that can be modeled,” Choucair said.
He argued that the August confidence data indicate companies are beginning to return to operating-budget decisions after the initial geopolitical disruption.
For capital markets, that may be more important than the modest monthly increase in the confidence index itself.
The restoration of corporate planning can help reopen channels for bank financing, private investment and capital expenditure because companies become more willing to commit to hiring, inventory, procurement and expansion once uncertainty becomes measurable.
Where Samer Choucair Sees the Opportunities
Choucair said some of the most attractive opportunities are emerging in infrastructure and logistics corridors, domestic manufacturing and import substitution, major development projects, industrial software, supply-chain automation, distributed energy and financial services that can reduce corporate working-capital requirements.
The common feature across these areas is their ability to solve constraints created or exposed by the current economic cycle.
Logistics investment can reduce vulnerability to transport disruptions.
Domestic manufacturing can lower dependence on imported products.
Industrial automation can improve productivity and help businesses absorb higher costs.
Distributed energy can strengthen operating resilience.
Financial platforms capable of reducing working-capital pressure can also become increasingly valuable when borrowing costs remain elevated.
For Samer Choucair, this means institutional capital should focus less on broad sector narratives and more on companies whose products or infrastructure directly address structural bottlenecks.
Sovereign Risk and Operating Risk Are Not the Same
Choucair cautioned that the investment environment still carries significant risks.
A renewed geopolitical escalation could quickly reverse improvements in confidence, while rising sovereign financing requirements could contribute to higher funding costs across the economy.
Transportation inflation and elevated prices for key industrial inputs such as aluminum, copper and steel could also pressure margins across manufacturing, construction and infrastructure.
He said sovereign wealth funds and asset managers therefore need to distinguish carefully between country-level risk and company-specific operating risk.
“Saudi sovereign capital can still finance the cycle,” Samer Choucair said. “The question for the investor is which company can preserve its margin if shipping and insurance costs remain above their 2024 and 2025 averages.”
That distinction is particularly important in an economy where large-scale sovereign and government-backed investment can continue supporting activity even as individual businesses experience very different levels of cost pressure.
A company participating in a growing domestic market can still destroy shareholder value if it cannot protect margins, control working capital or pass higher costs through to customers.
Cash Flow Matters More Than the Confidence Headline
For Samer Choucair, the recovery in confidence should therefore be interpreted as a signal that operating decisions are returning, rather than evidence that the risk environment has normalized.
Investors should focus on businesses with visible domestic cash flows, manageable financing requirements, resilient margins and exposure to structural investment themes supported by Vision 2030.
The strongest opportunities may ultimately emerge from companies capable of converting sovereign spending and domestic demand into recurring cash generation without becoming excessively dependent on stable shipping routes or favorable commodity prices.
“Confidence has returned sufficiently for companies to make operating decisions, but not sufficiently to eliminate the risk premium,” Samer Choucair concluded.
“Institutional investing in the 2026 cycle requires a focus on verifiable domestic cash flows, rather than a bet on an immediate return to stability across maritime corridors or on stable oil prices.”