MENA fund managers increase investments in Egypt, UAE

Middle Eastern funds plan to increase their investments in Egypt and the United Arab Emirates over the next three months, while largely keeping their exposure to other countries in the region at current levels, according to a Reuters poll.

Six of the 11 fund managers polled said they would increase their investments in Egypt.

“We see UAE and Egypt being structurally the most attractive markets in MENA,” said Vrajesh Bhandari, senior portfolio manager at Al Mal Capital.

The Egyptian market is up 4.94 per cent this year, outperforming other markets in the Middle East region, including Dubai, Abu Dhabi, and Qatar.

Aiming to shore up investor confidence, Egypt has been implementing economic reforms as part of a three-year, $12bn agreement with the International Monetary Fund in November 2016. The reforms included a value-added tax, cuts to energy subsidies and a steep currency devaluation.

Economists polled by Reuters last month expected Egypt’s economy to grow 5.5 per cent in the current 2018/2019 fiscal year.

“Egypt is undoubtedly the best growth story in MENA,” Bhandari said. “The reform programme is on track and once the inflationary pressures ease, we expect a pick up in the capex cycle.”

Fifty-five per cent of fund mangers said they would increase investments in the UAE, continuing a trend from previous months.

Dubai was one of the worst-performing markets globally last year, but has rebounded somewhat this year, with its benchmark index up 2.16 per cent so far. Abu Dhabi, meanwhile, is down 3.36 per cent this year.

While Dubai’s index had shown signs of a stronger recovery earlier this year, rising past 9 per cent by the end of April, it has fallen this month, due to global trade war and regional geo-political tensions.

“Regional markets are and will continue to be very volatile in the coming weeks, given the rising geopolitical tensions,” said Talal Samhouri, head of asset management at Amwal LLC.

“That will be an opportunity to take advantage of price volatilities, as usually these gyrations overshoot to either way, so we intend to emphasize security selection versus country allocation during the coming months.”

Five of the 11 fund managers said they would increase their investments in Kuwait. Kuwait’s index is up 15.1 per cent, making it the best performing market in the region.

“Currently the only markets that have sensible valuations are Qatar and Kuwait,” Samhouri said.

Most of the fund managers polled said they were keeping their allocations in Qatar, Saudi Arabia and Turkey the same.