ME funds favour Saudi, UAE sentiment improves
dubai — Middle East fund managers remain heavily positive towards Saudi Arabia’s equity market before index compilers decide whether to upgrade it, while sentiment has improved towards the UAE, a Reuters poll showed on Wednesday.
The monthly Reuters poll of 13 leading regional fund managers, conducted in the past week, found 69 per cent expect to raise allocations to Saudi Arabia within a regional equities portfolio over the next three months, and none anticipating a cut in allocations.
The ratios were the same as those in the previous month’s poll, which showed the most positive balance towards Saudi Arabia since September 2013. FTSE will decide in March whether to label Saudi Arabia an emerging market, while MSCI will announce its decision in June. In both cases, fund managers generally expect positive decisions. Actual inclusion in the indexes would only occur months later — in May 2019, in the case of MSCI — but a rotation of funds into Saudi Arabia from other emerging markets, which began late last year, appears to have much further to run.
Net foreign fund inflows into Saudi Arabia, through swaps and qualified foreign institutional investors, hit a record $703 million in January. But in a report issued a week ago, Dubai’s Arqaam Capital estimated inflows year-to-date were only 6.1 per cent of total inflows of passive funds that could be expected if both MSCI and FTSE upgraded the kingdom.
Several managers said the flows into Saudi Arabia were occurring partly at the expense of other markets in the region, particularly the UAE. William Wells, director at Schroders Middle East, said: “We reinvested the funds in
We reinvested the funds in Saudi Arabia, taking the market from neutral to overweight
William Wells, Director, Schroders Middle East
Saudi Arabia, taking the market from neutral to overweight.” Nevertheless, the latest poll suggested the peak of fund withdrawals from the UAE may have passed, with 23 per cent expecting to increase equity allocations there and 31 per cent anticipating a reduction. In the previous poll, 8 per cent expected to raise UAE equity allocations and 38 per cent to reduce them — the most negative ratio for the UAE since July 2014.