Business | Markets
Funds with UAE focus excel early
Although UAE markets were see-sawing during the first quarter, some UAE-focused funds managed to buck the trend and emerge as some of the region's best-performing funds during the period.
- By Yadullah Ijethadi, Special to Gulf News
- Published: 23:44 April 4, 2009
Dubai: Although UAE markets were see-sawing during the first quarter, some UAE-focused funds managed to buck the trend and emerge as some of the region's best-performing funds during the period.
Indeed, Makaseb Emirates Equity Fund was the region's best-performing fund in the first quarter, rising 14.71% during the period, compared with 6.62% by its benchmark MSCI UAE Domestic, according to Zawya Funds Monitor.
"Fund strategy for 2009 will be a combination of stock selection and asset allocation tactics," notes a Makaseb commentary on the fund in February. "The reason for focusing on asset allocation is that markets are not stable yet and market conditions are still bad."
Emirates Equity Fund is not the only UAE fund that has had a good run. National Bank of Abu Dhabi's UAE Islamic Fund was the third best performer, returning 9.95% in the first quarter, in what can best be described as volatile market conditions.
But managers of both funds seem to forecast headwinds ahead in 2009.
"The positive movements could be seen across the globe in anticipation that the stimulus packages have started yielding some results, with most of the central bank and governments stepping in to provide the much-needed rescue operations," notes the NBAD fund commentary. "We believe this is far from true; definitely we have some easing in the interbank rates, some contraction in the bond spreads, but we believe there will be some time lag before the stimulus packages can have an effective impact. We believe the equity markets will be range-bound for 2009."
Overall, UAE-focused funds made up four of the top six slots in the Zawya Funds Monitor based on first quarter returns. Abu Dhabi Commercial Bank's Al Nokhita Fund posted the fifth-best returns in the list, outperforming its benchmark, the MSCI UAE Domestic Index as well. Meanwhile, Makaseb's Emirates Opportunities Funds, another UAE-focused fund, finished sixth, rising 6.65% during the period.
Despite these early gains in the year, the mood remains circumspect. "The next most important data point will be the first quarter result announcements from banks in the region, which will provide a better sense of the health of their balance sheets. We wait with baited breath," says Ebrahim Masoud, senior investment officer at Makaseb.
And these gains could well be wiped out as UAE markets enter choppy waters. With first quarter results round the corner, EFG-Hermes expects the Abu Dhabi market to lose momentum and Dubai to remain volatile.
"The current momentum could result in some stocks and markets entering the results season at the top of the bear market rally (if not after the peak) and that increased liquidity around during this time could be used for profit-taking," says EFG-Hermes about the UAE and regional markets, which have enjoyed a decent rally in recent weeks.
The other funds in the top ten in the first quarter - including Global Investment House's Palestine Dedicated Fund which was the second best performer during the period - were focused on "frontier" markets such as Iraq, Iran, Lebanon and Palestine. That's not surprising given that more developed markets have taken a battering, and value investors are seeking hidden gems in less obvious places.
- The writer is Managing Editor of Zawya.com.
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