There are endless opportunities across the online gaming industry, which are only set to grow, and, with the right advice, strategies, and choice of markets, it is game on for investors around the world, says Chaddy Kirbaj, vice director at Swissquote Bank Dubai.
Speaking to Khaleej Times, he explained that the “golden age” of the gaming industry is ahead of us and that the industry is primed for investors. The robust growth in the gaming market has mainly been the result of a two-pronged approach by governments and the industry.
“In the UAE, for instance, the bullish trend is driven by massive investments in the technology ecosystem, the government’s keen support for creating a digital economy, superior 5G infrastructure, access to technology by the youth, and healthy consumer spending, backed by sound legal regulations and a diversified economy,” he said.
At the same time, the industry has seen a lot of consolidation through the mergers and acquisitions route adopted by many key players – a trend that is set to grow mainly in the Asia Pacific countries such as China, Japan, and South Korea, which together are expected to be the largest market in the gaming industry. “A phenomenal growth in the cloud computing, virtual reality, metaverse and another disruptive tech will also gain momentum as tech stocks settle for lower levels in 2022,” he noted.
According to Fortune Business Insights, the global gaming market will grow at a CAGR of 13.2 per cent between 2021 and 2028 to reach a valuation of $545.98 billion by 2028 – from a market that stood at $203.12 billion in 2020. What brightens the outlook further is that the global gaming market comprises segments that are exceptional drivers of growth by themselves – such as a mobile, tablet, browser PC and consoles – with vast market size and huge potential.
The mobile gaming sector was valued at $93.2 billion in 2021 with a year-on-year growth of 7.3 per cent, while the tablet segment grew by 2.6 per cent YoY to reach $11.7 billion. Overall, revenue from the mobile gaming segment accounted for 52 per cent of the global gaming market in 2021.
Kirbaj revealed that the gaming market in the UAE generated $344 million in 2020, from mobile, consoles, and PC. At least 68 per cent of the online population in the UAE were found to engage in gaming-related video content, while 32 per cent of men and 22 per cent of women said they actively spent money on gaming. Esports is yet another burgeoning segment in the UAE, with 10 per cent of the online population actively engaged in it.
“The popularity of these platforms has helped position the UAE as one of the world’s most promising online gaming markets, expected to generate steadily higher revenues in the years ahead,” Kirbaj said. “This follows estimates that the gaming market across Saudi Arabia, the UAE, and Egypt will be worth $3.1 billion by 2025 – in 2021, Saudi Arabia accounted for 60 per cent of the total revenue from the trio, the UAE for 29.6 per cent and Egypt for 9.8 per cent.”
Against such a promising backdrop, it is essential for gaming industry investors to choose the market and segment carefully, he stressed. “Swissquote’s Online Gaming Certificate, for example, invests in companies that develop online games and stream video games and esports. This theme trading certificate has generated almost 40 per cent in returns since its inception in September 2017 – and it’s important to remember that such investments are for the long term and carry a moderate risk.”
He explained that the advantage of such a theme is that it delivers the best of everything – combining high-profile gaming stocks such as Nintendo, Bandai Namco, Microsoft, Sony, and Roblox with diverse geographical positioning that offsets risks.
“However, due diligence is also essential when it comes to the timing and valuation of stocks, especially in situations like the current bear market, since gaming funds and shares are highly correlated to tech stocks and NASDAQ’s performance,” he cautioned. “Two of the gaming industry’s most prominent exchange-traded funds (ETFs) in the US – ESPO by VanEck and HERO by Blobal X – lost 23 per cent and 20 per cent of their value respectively year to date (YTD), while NASDAQ itself has lost more than 28 per cent YTD.”
He further explained: “That’s why it is vital for investors to be selective in choosing securities from the ETFs and not to bet on the entire index but to choose one good performing stock with solid fundamentals by itself. Investors should also look at the cost fine print to know whether there are any fees and the prospect of a dividend yield.”
