* Qatar shows biggest positive change among six major
* Managers cite government spending plans, valuations
* Gulf well placed to handle emerging market volatility
* Within Gulf, funds least bullish on Kuwait
* Turkey allocations continue to fall
By Nadine Wehbe and Azza Al Arabi
DUBAI, Jan 30 Middle East-based investment funds
have become much more bullish on Qatar's stock market, citing
heavy government spending and attractive valuations, the latest
monthly Reuters survey of the region shows.
Fifty-six percent of 16 leading investment managers said
they expected to raise allocations to Qatari equities in the
next three months, while only 6 percent expected to cut them.
That was the biggest positive change among the six major
markets in the survey, and compared with 20 percent saying they
would raise allocations to Qatari stocks in December's survey.
Qatar's government spending is expected to rise 11.6 percent
in 2014 from the 2013 plan as the government boosts
infrastructure construction, partly in preparation to host the
2022 soccer World Cup, the Ministry of Development Planning and
Statistics said last month.
This comes at a time when several other Gulf governments,
including Saudi Arabia, are slowing their state spending growth
in order to rationalise their finances.
"Qatar has better near-term growth prospects than any other
regional market. The government has a significant budget for
infrastructure spending which we expect will be largely spent
over the next three to five years," said Afa Boran, head of
asset management at Amwal Qatar.
He estimated both the Qatar and Saudi markets were trading
at about 12 times estimated corporate earnings for 2014, with
Qatar having better near-term earnings prospects. Earnings
growth in Saudi Arabia is currently being dampened by a
crackdown on illegal foreign labour that has raised companies'
costs, analysts say.
The United Arab Emirates markets are much more expensive at
about 15 times 2014 earnings, Boran said. Qatar's main stock
market index is up 35 percent since the end of 2012,
while Dubai has soared 134 percent.
The survey was conducted by Trading Middle East, a Reuters
forum for market profesionals.
Graphic of survey results: link.reuters.com/vex46v
The survey showed managers remained bullish on Middle
Eastern equities in general, with the proportion expecting to
increase their allocations over the next three months rising to
44 percent from 33 percent, though the ratio predicting a
decrease also rose, to 13 percent from zero.
"With the dividend season in GCC markets, and with dividend
yields of 3 percent-plus in most of them, it will attract more
liquidity into the markets, especially if emerging markets
continue to be volatile at the same time," said Mohammed Ali
Yasin, managing director of Abu Dhabi's NBAD Securities.
Because of their big current account and state budget
surpluses, Gulf Cooperation Council economies look much better
placed than many emerging markets elsewhere in the world to ride
out a reduction of U.S. monetary stimulus this year.
The survey showed that among the major Gulf stock markets,
funds were least bullish about Kuwait, with only 19 percent
expecting to raise allocations and 13 percent expecting to
Continued political tensions between the cabinet and
parliament in Kuwait are slowing big state investment projects
and making economic reforms difficult.
Because of a high-level corruption scandal destabilising its
politics and a sliding currency, Turkey has consistently been
the most bearish country in the survey over the past five
The latest survey, taken just before a massive interest rate
hike on Tuesday that may have stabilised the lira, showed
6 percent of fund managers expected to raise their Turkish stock
allocations while a quarter expected 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 - 7 DECREASE - 2 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 - 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
a) United Arab Emirates
INCREASE - 6 DECREASE - 4 SAME - 6
INCREASE - 9 DECREASE - 1 SAME - 6
c) Saudi Arabia
INCREASE - 5 DECREASE - 1 SAME - 10
INCREASE - 6 DECREASE - 3 SAME - 7
INCREASE - 1 DECREASE - 4 SAME - 11
INCREASE - 3 DECREASE - 2 SAME - 11
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; 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; Amwal Qatar.
(Writing by Andrew Torchia)