Middle East funds still bullish on equities after bull run-survey

Thu Oct 31, 2013 1:00am EDT

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* Majority expect to raise equity allocations in next 3
months
    * Slightly more bullish than September survey
    * Sharp difference of opinion over UAE equity markets
    * Slightly less bullish on Saudi Arabia
    * Optimism towards Egypt continues to grow

    By Nadine Wehbe and Azza Al Arabi
    DUBAI, Oct 31 (Reuters) - Fund managers in the Middle East
show little sign of taking money off the table as a year of
strong gains for Gulf stock markets nears its end, a Reuters
survey showed. 
    Dubai's market, rebounding from the bursting of a
real estate bubble in 2008-2010, is up 80 percent so far this
year, while Kuwait is up 33 percent and Saudi Arabia
 has gained 18 percent.
    While normally such gains might be expected to invite heavy
profit-taking, most fund managers in the monthly survey of 16
leading Middle East-based investment institutions said they felt
the markets had enough momentum to keep rising.
    The survey, conducted in the past 10 days by Trading Middle
East, a Reuters forum for market professionals, found 56 percent
of the managers saying they expected to increase their overall
equity allocation to the Middle East in the next three months,
while only 6 percent expected to reduce it.
    That was slightly more bullish than September, when 50
percent expected to increase equity allocations and 13 percent
to decrease them.
    "We do not see any resolution (other than postponing) to the
biggest challenge in the global markets, namely, unwinding of
leverage," said Tariq Qaqish, head of asset management at Al Mal
Capital in the United Arab Emirates.
    "With this in mind, we expect investors to embrace more risk
until the Fed (U.S. central bank) eventually starts tapering its
quantitative easing programme. We continue to remain positive on
equities as an outperforming asset class."
    <-----------------------------------------------------------
    Graphic of survey results:  link.reuters.com/taq34v  
    ----------------------------------------------------------->
    
    UAE
    Because of the spectacular gains in United Arab Emirates
stock markets, opinion among fund managers is most sharply
divided about them.
    Twenty-five percent of managers in the latest survey
expected to increase their UAE equity allocations and 25 percent
to decrease them, while the rest intended to keep them the same.
In the September survey, the figures were 31 percent for an
increase and 38 percent for a decrease.
    "We all believe the strong fundamentals that Dubai and Abu
Dhabi have, and yes we agree that markets were undervalued, but
after making around 80 percent in 10 months, I think we should
underweight UAE and be cautious since we might see the
correction very soon," said Abdullah Al Durdunji, chief treasury
officer at the Abu Dhabi Fund for Development.
    But Mohammed Ali Yasin, managing director at NBAD
Securities, said much would depend on whether Dubai was in late
November awarded the right to host the 2020 World Expo. It is
competing for that right with three other cities.
    A win could help to justify heavy real estate and
infrastructure investment in Dubai, and could push Dubai's stock
index towards a gain of 100 percent for this year, Yasin said.
If its Expo bid is unsuccessful, the market could trim this
year's gains to 65-70 percent.
    The latest survey also showed slightly less optimism about
Saudi Arabian equities; 56 percent of fund managers said they
expected to increase their allocations there, compared to 75
percent in September.
    Disappointing third-quarter earnings from several Saudi
consumer sector companies, which previously were heavily bought
by local retail investors, have knocked that market back
moderately in the last several days.
    The survey suggested sentiment towards Egypt continues to
improve gradually as fund managers hope the political and
economic environment there will stabilise next year after
planned elections.
    Forty-four percent of managers expected to raise their
equity allocations to Egypt in the next three months, while 19
percent expected to decrease them. In September, 38 percent
expected to increase their Egyptian investment.        
    
    SURVEY RESULTS 
    
    1) Do you expect to increase/decrease/keep the same your
overall equity allocation to the Middle East in the next three
months?
    INCREASE - 9   DECREASE - 1     SAME - 6  
    
    2) Do you expect to increase/decrease/keep the same your
overall fixed income allocation to the Middle East in the next
three months?
    INCREASE - 1     DECREASE - 3     SAME - 12    
        
    3) Do you expect to increase/decrease/keep the same your
equity allocations to the following countries in the next three
months?
    
    a) United Arab Emirates
    INCREASE - 4     DECREASE - 4     SAME - 8 
    
    b) Qatar
    INCREASE - 2     DECREASE - 1     SAME - 13  
    
    c) Saudi Arabia
    INCREASE - 9     DECREASE - 0     SAME - 7      
    
    d) Egypt
    INCREASE - 7     DECREASE - 3     SAME - 6      
        
    e) Turkey
    INCREASE - 0     DECREASE - 2     SAME - 14 
    
    f) Kuwait
    INCREASE - 1     DECREASE - 2     SAME - 13     
     
    NOTE - Institutions taking part in the survey are: Abu Dhabi
Fund for Development; Ahli Bank Oman; Al Rayan Investment; Al 
Mal Capital; Arqaam Capital; EFG-Hermes; Emirates NBD; Global 
Investment House; ING Investment Management (Middle East); 
Mashreq Bank; Naeem Financial Investments; National Bank of Abu 
Dhabi; Rasmala Investment Bank; Mohammed Alsubeaei & Sons 
Investment Co (MASIC); Schroders Middle East; Securities and 
Investment Co of Bahrain. 

 (Graphic by Vincent Flasseur; Writing by Andrew Torchia)
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