DUBAI: Schroders Middle East and North Africa fund will be heavily weighted toward Egyptian and United Arab Emirates construction stocks as it seeks to quadruple its size to $1 billion in 2010, fund manager Rami Sidani said.
The fund believes fast-paced economic growth and a rising population make Egypt the best investment pick in the MENA region, along with UAE construction stocks and Turkey s financial sector.
Sidani, who manages the $225 million Dubai-based Schroder International Selection Fund Middle East fund launched in September 2007, told Reuters Television in an interview: Egypt in North Africa is like China in Asia … The country is the most compelling story in the MENA.
With stock market stabilization and the recovery of the oil price, our target is to reach $1 billion in 2010, he said.
The fund aims to maintain a 10 percent exposure to the Egyptian market within the next couple of months but could increase this figure.
The fund s top holdings are still Turkey- and Gulf-centric, with Turkiye Garanti Bankasi accounting for 7.5 percent, Saudi Arabia s SABIC at 7 percent, Emaar Properties at 4 percent, and Qatar Industries at 4 percent.
It has underperformed Middle Eastern markets by 12.2 percent and the MSCI Arab Markets benchmark by 8 percent in the year to September 2009. The Arab benchmark has in turn lagged the MSCI Emerging Markets Index this year.
Sidani said a sharper risk appetite, recovering oil prices and rebounding equities would herald a turnaround in the fund s fortunes.
Our markets have lagged other emerging markets by more than 30 percent, so we expect our regional markets to start playing catch-up and outperform other emerging markets in the short and medium term, he said.
He said UAE infrastructure and construction companies that are recipients of increased government spending would constitute his top picks in the Gulf Cooperation Council (GCC) in 2010.
Crude oil prices, hovering around $80 bpd in the past weeks, have moved in step with global stocks, with investors viewing both as key indicators of economic health.
We play the role of a gateway for international investors into the region. We have the (players) and the local expertise to channel this money into the GCC, as not all of these markets are on the radar screen of international investors yet.
Egypt play
Sidani said he saw strongest potential in Egypt, where the EGX 30 index has recovered from a six-month low hit in July.
Egypt is the biggest market we focus on within our investment universe, a huge population of more than 80 million people, cheap access to energy, and one of the fastest growing economies in the world. A huge market with huge growth prospects, he said.
The International Monetary Fund (IMF) forecast in its October World Economic Outlook the Egyptian economy will grow by 4.5 percent in 2010 compared to 4.7 percent this year.
We focus on companies dependent on domestic growth which will be less affected by what is happening in the international market, but will benefit from huge government spending in the region, Sidani added.
The dust is finally settling. Valuations are becoming extremely attractive and we see strong inflows of international funds into our markets, he said.
