GCC Equity Funds


Markaz: GCC markets exhibited mixed trends in May 2008 has been a see-saw year for the GCC markets In a recently published monthly report by Kuwait Financial Centre "Markaz", which aims to analyze the performance of equity funds across the region, it is stated that, the GCC markets exhibited mixed trends in May 2008 with three of the six MSCI indices ending in the red. While in April, equity markets staged a revival on the back of strong quarterly corporate earnings, mixed signals on global economic outlook led to a more cautious approach in the GCC markets during May. Higher inflation-related concerns across the globe due to the rise in crude oil prices adversely impacted the chances of the GCC markets replicating the previous month’s strong performance. During the month, the MSCI GCC Index lost 3.8% compared to its 9.2% gain in April. The report goes on to state that asset managers became cautious and decreased their exposure to equities to 92% while free cash held by GCC Equity Funds increased to 7% in May. On a weighted average basis, GCC equity funds ended flat with a loss of 0.03% for the month of May. Performance of GCC MSCI Stock Indices (May 2008) 2008 has been a see-saw year for the GCC markets, posting losses in January and March while rebounding in February and April. It looks like the ride is continuing as markets ended on a weaker note in May. However, Qatar (up 5.2%) continued to rally and ended the month as the best performing market for the second consecutive month—among the 129 equity funds tracked by Markaz, all the top 5 funds belonged to Qatar. A major turnaround was noticeable in the case of the Bahraini market, which returned 2.5% during the month after posting a loss of 4.7% in the previous month. Overall, markets traded in the negative territory as the respective governments tackled problems related to inflation and money supply. Allocation Trends by Geography – GCC Equity Funds (May 2008) The report states that in terms of geographical asset allocation, GCC asset managers kept their portfolios constant for the most part. Allocation to other MENA markets decreased from 8% in April to 7% in May. In March 2008, the exposure to other MENA markets had increased to 10% from 4% in February. However, confidence in the GCC markets seems to be increasing as reflected in the reallocation of funds by asset managers from other MENA markets back into the GCC during the last two months. During May, asset allocation to Bahrain, Oman and Kuwait dropped by a small margin. Allocation to the Omani market decreased 42 basis points (bps), while allocation to the Kuwaiti market fell 37 bps to 16%. The reduction in asset allocation to these markets was offset by increase in allocation to the Qatar, Saudi and UAE markets, by 36 bps, 34 bps and 29 bps, respectively. GCC Equity Funds (Conventional & Islamic) The top five conventional GCC Equity Funds outperformed their benchmark in May. The MSCI GCC Index posted a loss of 3.8% for the month while the top five conventional all posted positive monthly returns. The top five Sharia-compliant funds also outperformed their benchmark. The MSCI GCC Islamic Index ended the month with a loss of 1.3% whereas the top five Sharia-compliant funds all generated positive MoM returns for May. ### About Kuwait Financial Centre “Markaz” Kuwait Financial Centre 'Markaz', with total assets under management of over USD 5.09 billion as of 31 March 2008, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997; and was recently awarded a BBB+ corporate rating by Capital Intelligence Ltd. -End-