ME Funds Bullish On Saudi But Cautious On UAE

Middle East fund managers are planning to increase investments in Saudi Arabia while withdrawing funds from Dubai, owing to a concern about the latter’s market over heating, according to a Reuters survey.

Half of the institutions surveyed said that they expect to increase their overall equity allocations to the Middle East over the next three months. Only 13 per cent said they would decrease them.

Fund managers said that the strong economic growth in the Gulf, aided by high oil prices and consumer spending, along with a young population, makes the region attractive for investments.

However many institutions were cautious about the stock markets in the UAE where Dubai’s bourse was up 71 per cent this year on the back of a recovery in its real estate prices.

Around 38 per cent of institutions expected to decrease their equity allocation to the UAE in the next three months while 31 per cent expected to increase it. The remaining fund managers said that they would keep their UAE exposure flat.

According to the survey, the investors are less bullish about Dubai’s markets in the short term since they believe that most of the stocks have become fully valued. Dubai is trading at around 16 times last year’s corporate earnings, compared to 13 times for the MSCI Emerging Markets Index.

On the other hand, Saudi Arabia’s stock market is estimated to take advantage of investors’ optimism with regards to the Gulf countries.

Around three quarters of the 16 institutions polled said that they are expected to increase their equity allocation to Saudi Arabia in the next three months while none expected to reduce it.

The Kingdom has also been preparing to open its stock market to direct investment to foreigners which could be instrumental in boosting its stocks, said the survey.