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Mideast funds see stocks rising in 2017; positive on Saudi budget

Most bullish balance for equities since February 2014 as oil prices, austerity policies revive confidence in Gulf

Gulf News

DUBAI: Middle East fund managers have become more positive toward equities in the region as the new year begins because of higher oil prices and efforts by Gulf governments to cut their budget deficits, a monthly Reuters poll found.

The poll of 13 leading fund managers, conducted over the last week, found 62 per cent expect to raise their allocations to regional equities in the next three months and none to reduce them, the most bullish view of equities since February 2014, before oil prices began to plunge.

In last month’s poll, 43 per cent expected to increase their allocations to Middle East equities and 7 per cent to cut them.

One factor behind the change is the rebound of oil prices to about $55 a barrel in the last several weeks from this year’s average of about $45, in the wake of an OPEC output agreement.

Fund managers also see Egypt’s long-term economic outlook as stronger after the Egyptian pound was floated in November.

“We are entering 2017 with a much more positive outlook for oil than we had in 2016,” said Kuwait’s Global Investment House head of regional asset management, Bader Al Ganem.

“Regional governments have moved towards more prudent fiscal measures. We are witnessing capital market reforms, such as Saudi aiming at inclusion in the MSCI Emerging Markets index in coming years. All this should bode well for equities.” Saudi Arabia said in its 2017 state budget, released last week, that it had made considerable progress this year cutting a huge deficit. It predicted further progress next year and pledged to raise spending moderately to support economic growth.

Forty-six per cent of fund managers now expect to raise their exposure to Saudi Arabia within a regional equities portfolio and 23 per cent to reduce them, compared with ratios of 29 per cent and 21 per cent last month.

However, after a strong rally by the Saudi market in the past two months, some managers believe valuations are no longer attractive, and they point out that austerity policies mean the Saudi economy is likely to stay sluggish next year.

Waha Capital’s managing director of capital markets in Abu Dhabi, Mohammad Al Jamal, said valuations looked expensive and stock prices already reflected positive news related to the Opec agreement and the budget.

“It is difficult to sustain current valuations as fundamentals continue to deteriorate,” said Dubai’s Almal Capital fund manager, Vijay Harpalani.

Despite long-term optimism towards Egypt, valuations there are also keeping funds cautious for now after a 74 per cent leap by the index this year.

Twenty-three per cent now expect to reduce their equity allocations to Egypt and 8 per cent to increase them, compared with 29 per cent and 21 per cent respectively last month.

Funds are extremely bearish towards Turkish equities because of militant attacks there, its involvement in the Syrian conflict, currency weakness and other economic problems.

Thirty-eight per cent anticipate reducing their equity allocations there and none foresee raising them.

Mideast funds see better year for stocks in 2017

DUBAI: Middle East funds have become more positive toward equities in the region as the new year begins because of higher oil prices and efforts by Gulf governments to cut their budget deficits, a monthly Reuters poll found.

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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 — 8 Decrease — 0 Same — 5

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 — 4 Decrease — 1 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) UAE

Increase — 8 Decrease — 0 Same — 5

B) Qatar

Increase — 5 Decrease — 0 Same — 8

C) Saudi Arabia

Increase — 6 Decrease — 3 Same — 4

D) Egypt

Increase — 1 Decrease — 3 Same — 9

E) Turkey

Increase — 0 Decrease — 5 Same — 8

F) Kuwait

Increase — 3 Decrease — 0 Same — 10

NOTE: Institutions taking part in the survey are: 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; Rasmala Investment Bank; Waha Capital.

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