Dubai: The markets look scary right now, but some fund managers are gearing up for an imminent recovery, at least in pockets of the regional economy.
UAE-based Daman Investment recently launched a Dh200 million close-ended, GCC-focused fund, with an eye on market recovery. The Daman Fifth Fund is focusing on blue-chip equities listed on the GCC stock exchanges, debt products and commodities, in a way spreading its risks across a range of asset classes.
Daman is not the only one. Muscat-based Vision Investment recently unveiled a ‘Real Economy' Fund, which is a play on the region's strong macro-economic fundamentals, but ignores banks, finance, investment, insurance and leasing companies.
These are clear signs that investors and fund managers are looking to isolate the troubled sectors and focus on those that look set to grow as Gulf countries unveil expansionary budgets.
Bahrain-based Securities & Investment Company (Sico) believes that regional equity markets have yet to price in additional liquidity emanating into the region; driven by higher oil prices and increased government spending. "Most GCC countries are again expected to have budgetary surpluses [or significantly lower deficits] compared to concerns on increasing budget deficits last year," says Sico in a report.
Patterns
Others such as ING Investment Management (IM) are also looking for growth patterns in volatile markets. "Now is the time for active stock selection," says Fadi Al Said, Head of Equities at ING IM Middle East. "In our opinion, bottom-up driven processes with high stock selection capabilities are going to be alpha creators in the Mena region this year."
"Through actively managing the portfolio, we returned 34.21 per cent in 2009 for the ING (L) Invest Middle East and North Africa Fund. This year we see considerable opportunities across the region for active fund managers. We are positioning the fund to focus on the opportunities that we see arising in Saudi Arabia, Qatar, Oman and Egypt."
Like Vision, ING IM is also focusing on ‘real economy' sectors such as oil and gas stocks in Saudi Arabia, Qatar and Oman, consumer and shipping stocks in Saudi and infrastructure opportunities in the UAE.
Cautious
Most fund managers are similarly focused on Saudi and Qatari markets on the back of their strong macroeconomics and underleveraged economies but are cautious on banks.
Kuwait Financial Centre (also known as Markaz) echoes the sentiment, noting that 58 per cent of fund manager asset allocations are either targeting Saudi Arabia (42 per cent) or Qatar (16 per cent).
But where there is high risk, there may well be high reward, as some fund managers are proposing investing in property and banking stocks, but only for the brave at heart.
"Long-term investors will find it safer to build positions in sectors such as petrochemicals, blue chip banks, and telecoms, while more risk taking investors will see more trading opportunities in sectors such as real estate and financials [excluding blue chip banks]," says Sico.
The writer is Managing Editor, Zawya.com
