Shuaa sees surge in Mideast equity and fixed income investments

Dubai : Shuaa Asset Management, the asset management arm of Shuaa Capital, believes the Middle East equity and fixed income asset classes are poised for strong recovery, although market corrections are inevitable on the recovery path.

Speaking to Gulf News in an interview, Nadi Bargouti, Managing Director of Shuaa Asset management, said the market is on a recovery path with strong interest coming from foreign institutional investors in both regional equity and fixed income asset classes.

"After a long pause, foreign institutions and high networth individuals have started taking exposure to the local and regional markets. In recent weeks there has been a substantial increase in enquiries. We expect the fundamental strength of the market to bring investors back," said Bargouti.

He expects the sustained institutional interest in the regional asset classes will eventually increase the confidence of regional and local investors.

"Many regional and local investors are remaining at the periphery. Once they see foreign buying is sustained they will enter the market and drive the recovery," he said.

Proving his point that there is scope for value investing even in a down market is the recent performance of three funds managed by Shuaa. All three Gateway funds, namely the Arab Gateway Fund, Emirates Gateway Fund and the Saudi Gateway Fund, have beaten their benchmark indices consistently in the last nine months.

Gateway funds surge

While the net asset value (NAV) of the Arab Gateway Fund gained 13.3 per cent in the last nine months against 8.3 per cent growth by the benchmark S&P index, the Emirates Gateway Fund was up 2.07 per cent against a 1.72 per cent decline in the respective benchmark. The Saudi Gateway Fund gained 5.68 per cent year to date against the benchmark gain of 4.41 per cent.

Bargouti attributes the Shuaa Funds' success in consistently beating the index to value-oriented, disciplined and long-term approach to selecting investments.

Shuaa Asset Management's recent allocations have been targeted toward Saudi Arabia and the regional financial services industry. These factors are selected and weighted monthly, allowing the funds to outperform the market year to date

"The Fund's track record of consistent returns relies on an in-depth fundamental research approach which blends a top-down macro approach and sector views with long-term, bottom-up value picks. The team follows a value-oriented, disciplined and long-term approach to selecting investments," he said.

As long as Dubai's debt issues and the general deleveraging continue, there will be an overhang in the regional markets.

However, there are signs that the macro situation is slowly improving and any developments will provide a major boost as business confidence returns. Bargouti said the recent successful return of the regional sovereigns and corporates to the international debt market will be a big boost to the regional markets in the coming months.

"Since the last week of September, around $8 billion [Dh29.36 billion] was raised [through bonds] including Dewa, Dubai Government, Emaar, Qtel, among others. This raised the total issuances to $20 billion in the Gulf alone. The Dubai government issuances have certainly contributed to motivate new issues. This will attract the attention of local, regional and international investors to look at yields."