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SAUDI MARKET ATTRACTIVE

Funds may cut UAE, Qatar exposure after MSCI upgrade

Dubai, May 29, 2014

By Nadine Wehbe and Azza Al Arabi

A substantial number of Middle East funds intend to cut their exposure to stocks in the United Arab Emirates and Qatar, shifting money to less richly valued markets such as Saudi Arabia, a monthly Reuters survey showed.

Shares in Dubai, Abu Dhabi and Qatar  have surged over the past 12 months in anticipation of those markets' upgrade to MSCI's emerging market index, which will take place at the end of this week.

Many funds believe risk/reward ratios for the three markets have now deteriorated: the latest survey of 15 leading investment managers, conducted over the past 10 days, found only 20 percent expect to increase their allocations to UAE equities in the next three months, while 40 percent expect to cut them.
    
These figures mark a further deterioration from the April survey, when 27 percent of managers expected to raise their UAE equity allocations and 40 percent expected to reduce them.

In Qatar's stock market, 20 percent of funds expect to increase their allocations while 33 percent foresee cutting them. That is a major shift from April, when 40 percent intended to raise allocations and only 13 percent to decrease them.

"The markets are volatile in UAE and Qatar, and may continue to be so in June until the end of Q2," said Mohammed Ali Yasin, managing director of NBAD Securities in Abu Dhabi.

The survey was conducted by Trading Middle East, a Reuters forum for market professionals.
    
 SAUDI, EGYPT

Some of the money leaving the UAE and Qatar looks set to flow to Saudi Arabia's stock market; 47 percent of managers expect to raise their allocations to the Saudi bourse, while only 7 percent intend to cut back.

The survey suggests Egyptian equities will also benefit. The bullish percentage in that market is 27 percent, with no manager expecting to reduce allocations.

Much of the optimism towards Egypt is based on expectations that a victory by former army chief Abdel Fattah al-Sisi in this week's presidential elections will lead to more political stability and an economic recovery. However, the survey was taken before the voting took place in unexpectedly low turnout, which may weaken Sisi's mandate.

There is also some evidence that money will flow from the peaking Gulf stock markets to Middle East fixed income; 27 percent of managers expect to raise allocations to fixed income and 13 percent to reduce them.
    
That is a big change from April, when 13 percent expected to increase their fixed income allocations and 33 percent foresaw decreasing them.

For a second straight month, the survey revealed signs of returning confidence in Turkish equities, after a long period in which funds pulled money out of Turkey because of political instability and a weak lira.

Thirteen percent of managers expect to raise their equity allocations to Turkey over the next three months while 7 percent expect to cut them. - Reuters




Tags: Qatar | UAE | funds |

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