* Sentiment weakens further in UAE, big bearish shift in
* Managers most bullish on Saudi among major bourses
* Egypt stocks set to attract more flows from Gulf
* More money will also flow to fixed income
* Continued signs of improving sentiment towards Turkey
By Nadine Wehbe and Azza Al Arabi
DUBAI, May 29 A substantial number of Middle
East funds intend to cut their exposure to stocks in the United
Arab Emirates and Qatar, shifting money to less richly valued
markets such as Saudi Arabia, a monthly Reuters survey showed.
Shares in Dubai, Abu Dhabi and Qatar
have surged over the past 12 months in anticipation of those
markets' upgrade to MSCI's emerging market index, which will
take place at the end of this week.
Many funds believe risk/reward ratios for the three markets
have now deteriorated: the latest survey of 15 leading
investment managers, conducted over the past 10 days, found only
20 percent expect to increase their allocations to UAE equities
in the next three months, while 40 percent expect to cut them.
These figures mark a further deterioration from the April
survey, when 27 percent of managers expected to raise their UAE
equity allocations and 40 percent expected to reduce them.
In Qatar's stock market, 20 percent of funds expect to
increase their allocations while 33 percent foresee cutting
them. That is a major shift from April, when 40 percent intended
to raise allocations and only 13 percent to decrease them.
"The markets are volatile in UAE and Qatar, and may continue
to be so in June until the end of Q2," said Mohammed Ali Yasin,
managing director of NBAD Securities in Abu Dhabi.
The survey was conducted by Trading Middle East, a Reuters
forum for market professionals.
Graphic of survey results: link.reuters.com/xur69v
Some of the money leaving the UAE and Qatar looks set to
flow to Saudi Arabia's stock market; 47 percent of managers
expect to raise their allocations to the Saudi bourse, while
only 7 percent intend to cut back.
The survey suggests Egyptian equities will also benefit. The
bullish percentage in that market is 27 percent, with no manager
expecting to reduce allocations.
Much of the optimism towards Egypt is based on expectations
that a victory by former army chief Abdel Fattah al-Sisi in this
week's presidential elections will lead to more political
stability and an economic recovery. However, the survey was
taken before the voting took place in unexpectedly low turnout,
which may weaken Sisi's mandate.
There is also some evidence that money will flow from the
peaking Gulf stock markets to Middle East fixed income; 27
percent of managers expect to raise allocations to fixed income
and 13 percent to reduce them.
That is a big change from April, when 13 percent expected to
increase their fixed income allocations and 33 percent foresaw
For a second straight month, the survey revealed signs of
returning confidence in Turkish equities, after a long period in
which funds pulled money out of Turkey because of political
instability and a weak lira.
Thirteen percent of managers expect to raise their equity
allocations to Turkey over the next three months while 7 percent
expect to cut them.
1) Do you expect to increase/decrease/keep the same your
overall equity allocation to the Middle East in the next three
INCREASE - 5 DECREASE - 3 SAME - 7
2) Do you expect to increase/decrease/keep the same your
overall fixed income allocation to the Middle East in the next
INCREASE - 4 DECREASE - 2 SAME - 9
3) Do you expect to increase/decrease/keep the same your
equity allocations to the following countries in the next three
a) United Arab Emirates
INCREASE - 3 DECREASE - 6 SAME - 6
INCREASE - 3 DECREASE - 5 SAME - 7
c) Saudi Arabia
INCREASE - 7 DECREASE - 1 SAME - 7
INCREASE - 4 DECREASE - 0 SAME - 11
INCREASE - 2 DECREASE - 1 SAME - 12
INCREASE - 3 DECREASE - 3 SAME - 9
NOTE - Institutions taking part in the survey are: Abu Dhabi
Fund for Development; Ahli Bank Oman; Al Rayan Investment LLC;
Al Mal Capital; Arqaam Capital; Emirates NBD; Global Investment
House; 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; Amwal Qatar.
(Writing by Andrew Torchia)