Mideast funds more bullish on eq­ui­ties UAE top pick, Kuwait sees most bullish bal­ance

Kuwait Times - - BUSINESS -

Mid­dle East funds have be­come more bullish to­wards eq­ui­ties in the re­gion but are cau­tious to­wards Saudi Ara­bia and Egypt af­ter spec­tac­u­lar re­bounds in those stock mar­kets, a monthly Reuters poll found.

The poll of 14 lead­ing fund man­agers, con­ducted over the last week, found 43 per­cent ex­pect to in­crease their al­lo­ca­tion to Mid­dle East eq­ui­ties over the next three months and 7 per­cent to re­duce them. This is the most bullish bal­ance to­wards eq­ui­ties since Jan­uary, and com­pares to ra­tios of 14 per­cent and 7 per­cent in last month’s sur­vey.

“The next three months co­in­cide with the an­nual re­sults of the pub­lic com­pa­nies, and more im­por­tantly their div­i­dend dis­tri­bu­tions for 2016 prof­its,” said Mo­hammed Ali Yassin, head of as­set man­age­ment at Abu Dhabi’s NBAD Se­cu­ri­ties. “This will prove to be a pos­i­tive cat­a­lyst for those com­pa­nies whose cash div­i­dend dis­tri­bu­tion could yield 4 per­cent or more.” The United Arab Emi­rates is the most fa­vored coun­try among eq­uity in­vestors, with 57 per­cent of participants say­ing they ex­pect to raise al­lo­ca­tions there while only 7 per­cent ex­pect to re­duce them. That com­pares with ra­tios of 29 per­cent and 7 per­cent last month.

“The UAE mar­ket is get­ting at­trac­tive in terms of valuations, so it seems a good time to in­crease al­lo­ca­tions. The only thing miss­ing is a cat­a­lyst news item that would drive prices up,” said Talal Samhouri, head of as­set man­age­ment at Qatar’s Amwal. Qatari shares, which in last month’s sur­vey drew the most bear­ish bal­ance since the sur­vey was launched in Septem­ber 2013, are back in some man­agers’ good graces, with 29 per­cent say­ing they ex­pect to in­crease al­lo­ca­tions there and 21 per­cent an­tic­i­pat­ing re­duc­tions. Last month, only 7 per­cent said they would in­crease and 50 per­cent said they would cut back.

“His­tor­i­cally, Qatari com­pa­nies have paid healthy div­i­dends with the en­tire dis­tri­bu­tion made dur­ing Q1 2017. Com­bined with the sec­ond half of Qatar’s in­clu­sion in the FTSE emerg­ing mar­ket in­dex in March 2017, this pro­vides op­por­tu­ni­ties in a num­ber of stocks,” said Ak­ber Khan, head of as­set man­age­ment at Do­hab­ased Al Rayan In­vest­ment.

Fund man­agers are cau­tious, how­ever, on two eq­uity mar­kets that have soared in the last sev­eral weeks. Saudi Ara­bia’s in­dex has jumped over 25 per­cent since the gov­ern­ment’s $17.5 bil­lion in­ter­na­tional bond is­sue in late Oc­to­ber eased fears about its abil­ity to cope with an era of cheap oil, and helped it be­gin mak­ing de­layed pay­ments to set­tle its debts to pri­vate com­pa­nies.

Man­agers have turned less bullish to­wards Saudi eq­ui­ties, how­ever; 29 per­cent said they ex­pect to in­crease al­lo­ca­tions there and 21 per­cent to re­duce them, com­pared to ra­tios of 36 per­cent and 14 per­cent last month. “Saudi mar­ket valuations have come up in the past two weeks so much that any neg­a­tive news com­ing from the po­ten­tial OPEC deal (to cut oil out­put) would mean a ma­jor pull-back for the stock mar­ket,” said Samhouri at Amwal. Sim­i­larly, Egypt’s in­dex jumped 37 per­cent af­ter the Nov. 3 float of the Egyp­tian pound, but the rally has be­gun to make valuations less at­trac­tive, par­tic­u­larly given con­tin­ued head­winds for the Egyp­tian econ­omy.

Twenty-one per­cent of man­agers now ex­pect to in­crease al­lo­ca­tions to Egyp­tian eq­ui­ties and 29 per­cent to re­duce them, com­pared to 21 per­cent and 43 per­cent last month. The sur­vey shows, how­ever, that Kuwait’s stock mar­ket - long ne­glected by Gulf in­vestors be­cause of poor liq­uid­ity - is gain­ing pop­u­lar­ity, with man­agers cit­ing at­trac­tive valuations af­ter this year’s un­der­per­for­mance. Twenty-nine per­cent ex­pect to raise al­lo­ca­tions there and only 7 per­cent to re­duce them - the most bullish bal­ance for Kuwait since the Reuters poll was launched in Septem­ber 2013. “Some stocks are of­fer­ing good value now af­ter hav­ing cor­rected,” said Vishal Gupta, port­fo­lio man­ager at Dubai-based Ras­mala. — Reuters

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