GCC Equity Funds bounce back along with the market

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Markaz Research

GCC Equity Funds bounce back along with the market 02 - Mar - 2011

In a recently published quarterly report by Kuwait Financial Centre "Markaz", which aims to analyze the performance of nearly 150 equity funds across the region, GCC markets remained positive for most part of the year, showing significant recovery from the global financial crisis. S&P GCC Index saw two consecutive quarters of gains; 5% in 4Q10 and 10% in 3Q10, pushing the annual gain to 16%. The quarter’s best performance was from MSCI Qatar which gained 13%, bringing full year gain to 26%, which was the second best performance in 2010 (MSCI Indices). The worst performer for 4Q10 was MSCI Bahrain, which lost 3% bringing the full year decline to 21%.

AUM’s ended the year at USD 12.5 bn, a 4% annual growth, with the addition of 8 funds, bringing total funds covered to 147. Saudi Arabia’s AUMs were flat for the year and quarter while Kuwaiti funds saw an annual increase of 10% and a quarterly growth of 6%.

Saudi fund asset weighted returns outperformed the S&P Saudi index with an annual gain of 14% versus 9% for the index while UAE funds lost 4% versus a loss of 3% in MSCI UAE.


Asset Management Industry - Equity Funds (December 2010)

Manager

AUM
($ Mn)

Manager Domicile

Market Share

Riyad Capital

1429

Saudi Arabia

11.5%

HSBC Saudi Arabia

1160

Saudi Arabia

9.4%

Kuwait Financial Centre

930

Kuwait

7.5%

Samba Financial Group

830

Saudi Arabia

6.7%

National Investments Company

788

Kuwait

6.4%


GCC markets finally took part in the global, post-financial crisis recovery, with a mostly positive year. For most markets, only the second quarter registered significant declines due to markets tumbling in May as the European sovereign debt crisis in Greece hit a peak causing wide-spread market panic. S&P GCC closed out the year with an annual gain of 16%, boosted by a 5% gain in 4Q.

Fund managers favored Saudi Arabia with an average 45% allocation, versus an average of 40% in 2009. Confidence in the various markets was quite stable throughout though the UAE saw a decline from 13% in June 2010 to 10% by the end of the year. Exposure to Qatar hit a 27-month high, at 18% as of December 2010. 

Geographical Allocation - Equity Funds

 

Country

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Saudi Arabia

44%

43%

45%

42%

46%

Kuwait

12%

13%

12%

14%

14%

UAE

10%

11%

13%

10%

10%

Qatar

17%

16%

15%

17%

18%

Oman

5%

5%

4%

3%

4%

Bahrain

2%

1%

2%

1%

1%

Other Mena

10%

10%

8%

13%

7%


Source: Markaz Research

The Kuwait Index gained 6.75% in 3Q10, however, the trend reversed in 4Q10 with the market recording a loss of 0.4%. This brought the exchange to a flat close with a loss of 1%. Banking sector gained 42.5% while Investment and Real Estate sectors lost 15.6% and 13.3%, respectively.

Fund managers, on average, responded to market cues by increasing their exposure to equities. Allocation to equities peaked at 90% at the end of December 2010 and was at a low of 82% at the end of June 2010. On an asset weighted basis, Kuwait Equity funds gained 16.7% for the year.

Kuwait Financial Centre “Markaz” was the top equity fund manager with an AUM of USD 886 mn, representing a 21.5% market share.

 Top Five Fund Managers (in terms of AUM in Dec- 2010)

Fund Manager

AUM
($ Mn)

Market Share

Kuwait Financial Centre

886

21.5%

National Investments Company

788

19.1%

Kuwait Investment Company

598

14.5%

Global Investment House

485

11.7%

Burgan Bank

311

7.5%