Mideast funds turn more positive on Saudi equities – Reuters

11 months ago Comments Off on Mideast funds turn more positive on Saudi equities – Reuters

* Most positive on Saudi stocks since February 2015

* UAE still region’s most favoured stock market

* Qatar loses some favour on relative valuations

* Managers turn bearish on Egypt over FX shortage

* Slightly more positive on Middle East fixed income

By Celine Aswad

DUBAI, Feb 29 Middle East fund managers have
become more positive on Saudi Arabian equities after valuations
dropped and because of signs that oil prices may be bottoming
out, a monthly Reuters survey shows.

Late last year, managers became bearish towards the Arab
world’s biggest stock market as low oil prices damaged the
government’s finances, making major austerity measures
inevitable. In last month’s survey, 29 percent said they
expected to raise their Saudi equity allocations over the
following three months and 21 percent to cut them.

But in the most recent survey of 14 leading fund managers,
conducted over the past 10 days, 43 percent said they expected
to boost their allocations to Saudi stocks – the highest figure
since February 2015. Only 7 percent anticipated reducing
allocations.

Mohammed Ali Yasin, managing director of Abu Dhabi’s NBAD
Securities, said that after recent drops in stock prices,
dividend yields in the kingdom were some of the highest
regionally.

Overall, the survey showed 36 percent of respondents
expecting to increase exposure to Middle East equities, while 7
percent foresaw cutting them. That was not significantly changed
from ratios of 43 percent and 7 percent last month.

Despite rebounds of around 10 percent or more in Gulf stock
indexes since mid-January, many managers are not convinced an
extended recovery is necessarily starting, given the volatility
of oil prices and the fact that austerity measures across the
region have yet to make themselves fully felt.

“Oil prices will continue to hold sway over investor
sentiment over the next few months. Consequently, we expect
sentiment to remain subdued with a negative bias in the first
half,” said Sachin Mohindra, portfolio manager at Abu Dhabi’s
Invest AD.

The United Arab Emirates is the favoured stock market among
survey respondents for a ninth month in row; 57 percent expect
to raise UAE equity allocations and none to cut them. In last
month’s survey, the ratios were 57 percent and 7 percent.

“UAE markets have shown signs of recovery in terms of
turnover and prices, after a long term bearish trend since May
2014,” said Tamer Kamal, head of asset management at the
country’s Union National Bank.

But Qatar has lost some favour with portfolio managers, as
14 percent now expect to raise allocations there and the same
number to cut them. Last month, 43 percent expected to boost
holdings in Qatar and 7 percent to reduce them.

Managers said forward stock price valuations in Qatar,
especially in the banking sector, although cheap by historic
measures, were looking slightly more expensive compared to their
Gulf peers.

Funds have also turned negative on Egyptian equities, with
21 percent expecting to cut their exposure and 7 percent to
raise it. Those figures are reversed from last month’s survey.

The chronic dollar shortage in Cairo continues to sap the
economy, preventing many companies from operating normally.

Managers have turned more positive on Middle East fixed
income; 21 percent expect to raise allocations in that asset
class and the same number to reduce them. Last month, the ratios
were 7 percent and 14 percent.

The prospect of sharp U.S. interest rate increases this year
appears to have diminished, while some managers are parking a
portion of their funds in liquid short-term fixed income
instruments until regional equity markets settle on a smoother
path.

“Sovereign or high-grade bonds and sukuk have become the
preferred instrument in the short term until the markets become
less volatile,” said Yasin at NBAD Securities.

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 – 5 DECREASE – 1 SAME – 8

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 – 3 DECREASE – 3 SAME – 8

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 – 8 DECREASE – 0 SAME – 6

b) Qatar

INCREASE – 2 DECREASE – 2 SAME – 10

c) Saudi Arabia

INCREASE – 6 DECREASE – 1 SAME – 7

d) Egypt

INCREASE – 1 DECREASE – 3 SAME – 10

e) Turkey

INCREASE – 1 DECREASE – 3 SAME – 10

f) Kuwait

INCREASE – 2 DECREASE – 2 SAME – 10

NOTE – Institutions taking part in the survey are: Ahli Bank
Oman; Al Mal Capital; Al Rayan Investment LLC; Amwal Qatar;
Arqaam Capital; Emirates NBD; Global Investment House; Invest
AD; National Bank of Abu Dhabi; NBK Capital; Schroders Middle
East; The National Investor; Union National Bank; Rasmala
Investment Bank.

(Editing by Andrew Torchia)

Mideast funds turn more positive on Saudi equities – Reuters}