March 27, 2014 / 5:01 AM / in 4 years

Middle East funds ready to buy equities on dips-survey

* Attitude to equities slightly less bullish than last month
    * More bearish towards fixed income after Yellen remarks
    * Still bullish on Egypt because of political transition
    * Less positive towards Qatar after diplomatic dispute
    * Managers continue cutting allocations to Turkey

    By Nadine Wehbe and Azza Al Arabi 
    DUBAI, March 27 (Reuters) - Middle East fund managers are
willing to buy most of the region's main equity markets on dips,
believing corporate earnings and balance sheets will continue
improving this year, a monthly Reuters survey shows.
    Markets retreated early this month as retail investors
rushed to take profits during the worst of the geopolitical
uncertainty over Ukraine. Dubai's bourse fell 6.7
percent from its peak close to its trough. Qatar's bourse 
dropped 3.8 percent.
    But many fund managers said they did not view the pull-back
as a sign of long-term vulnerability in the markets, but as an
opportunity created by natural volatility.
    "We welcomed the panic selling in Qatari and UAE equities
during March," said Akber Khan, director of asset management at
Qatar's Al Rayan Investment.
    "It offered attractive entry points for a number of
companies with strong market positions, solid balance sheets and
impressive cash flows."
    The survey of 15 leading investment managers, conducted over
the past 10 days, found 47 percent of them expected to raise
their equity allocations to the Middle East over the next three
months, while only 13 percent expected to reduce them.
    That was down slightly from the results of last month's
survey, when 53 percent - a four-month high - expected to raise
their equity allocations and none expected to reduce them. 
    "I expect markets to do well as local economic catalysts are
solid and corporate performance remains strong," said John
Sfakianakis, chief investment strategist at Saudi Arabian
investment firm MASIC.
    The survey showed a significant shift in fund managers' view
of fixed income, however, after U.S. Federal Reserve Chair Janet
Yellen made comments last week which were interpreted to mean
interest rate hikes could come in about a year's time, sooner
than anticipated. 
    Only 7 percent of managers expect to increase their
allocations to Middle East fixed income in the next three
months, while 20 percent expect to cut them. That compares with
a positive ratio of 20 percent and a negative one of 13 percent
in last month's survey.
    The survey was conducted by Trading Middle East, a Reuters
forum for market professionals. 
    Graphic of survey results:
    Managers are most bullish towards Egypt, because of a view
that the country is making progress in its transition to
elections, with army chief Field Marshal Abdel Fattah al-Sisi -
seen as the best guarantor of stability - set to become
    Forty percent of respondents in the survey expect to raise
their equity allocations to Egypt over the next three months,
while none expect to reduce them.
    Buying intentions also outweigh selling intentions by
considerable margins in the United Arab Emirates and Saudi
    "I believe that Q2/2014 will witness good pick-up in UAE
markets especially, benefiting from the dividend distributed
which is larger than last year, and the Q1/2014 announcements by
mid-April," said Mohammed Ali Yasin, managing director at the
UAE's NBAD Securities.
    Although some funds have already moved, Yasin said more
foreign money would flow into the UAE and Qatar in the run-up to
their inclusion in MSCI's emerging markets index in May.
    Bullishness towards Qatar has decreased since last month,
however, in part because of major stocks going ex-dividend, and
perhaps in part because of the country's diplomatic dispute with
its Gulf neighbours; Saudi Arabia, the UAE and Bahrain withdrew
their ambassadors, saying Qatar had failed to commit to regional
security policy.
    Fund managers said major amounts of money had not left Qatar
because of the dispute, but Gulf Cooperation Council investors
have significant holdings in Qatar, which could be in doubt if
the dispute escalates.
    A third of managers said they expected to raise equity
allocations to Qatar, down from 47 percent in last month's
survey. The ratio of bearish managers increased to 27 percent
from 7 percent.
    Managers have been bearish on Turkey since the survey was
launched last September, because of currency instability, a
corruption scandal plaguing the government and the approach of
elections this year. Thirteen percent expect to raise equity
allocations to Turkey, while a third intend 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 - 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 - 11      
    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 - 3    SAME - 6      
    b) Qatar
    INCREASE - 5   DECREASE - 4   SAME - 6    
    c) Saudi Arabia
    INCREASE - 5   DECREASE - 0    SAME - 10    
    d) Egypt
    INCREASE - 6   DECREASE - 0    SAME - 9         
    e) Turkey
    INCREASE - 2   DECREASE - 5   SAME - 8          
    f) Kuwait
    INCREASE -4   DECREASE - 2     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)
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