GCC Fund Managers favoring Saudi Arabia: Markaz Study


Markets lost in 4Q09

A recently published report by Kuwait Financial Centre "Markaz", which aims to analyze the performance of equity funds across the region, states that, GCC markets swung between gains and losses throughout the year; the first quarter showed lingering losses from the previous year, while the second and third quarters produced significant gains as markets rallied on the back of recovering commodity prices and a global market rally. The fourth quarter saw a reversal of fortunes as GCC markets turned south led by Dubai sentiment. MSCI GCC lost 8% in the fourth quarter bringing the annual gain to 18%.

The quarter’s best performance was from MSCI Saudi Arabia which limited its loss to 1%, bringing full year gain to 33%, which was the second best performance in 2009 (MSCI Indices). The worst performer for 4Q09 was MSCI Kuwait, which lost 19% bringing the full year decline to 11.7%.

AUM’s ended the year at USD 12 bn representing an institutionalization rate (AUM/Mcap) of almost 2%. Both Saudi Arabia and Kuwait saw their AUM decline in the fourth quarter by 3% and 10%, respectively.

Assets under Management – December 2009

Source: Markaz Research

Asset Allocation Trends– GCC Equity Funds (December 2009)

Fund managers favored Saudi Arabia throughout the year, allocating between 36% and 42% of assets to the Kingdom in 2009 (Table 3). Confidence in the Kuwait market declined dramatically, from 20% in June to 11% in December; the same can be said for the UAE, where managers allocated 17% of their assets in September before cutting exposure to 10% in December.

Geographical Allocation - Equity Funds

Exposure to equities increased throughout the year as managers took advantage of a second and third quarter rally; allocation was at 87% in December from a low of 70% in March whereas Cash began the year with 28% of manager assets steadily declining to 12% by December.

Saudi Arabia Equity Funds

Saudi Arabia’s Tadawul All-Share Index (TASI) lost 3.17% in 4Q09, bringing the full year gain to 27%, the highest among GCC markets. Banks & Financials lost 9% in the quarter while Petrochemicals and Energy gained 5% and 8.8%, respectively. Liquidity in the Saudi market was down by 35% for the year, with Value Traded at USD 338 bn.

In December, fund managers decreased allocation to cash to 1.5% (on an asset weighted basis) and held 98% of assets in equities. AUM’s were flat in the final quarter of the year at USD 4.7 bn after expanding by 6.5% in the third quarter and 14% in 2Q09.

Kuwait Equity Funds

The Kuwait market faltered again in the final quarter of the year, losing 10% in 4Q09 after declining 3.25% in the third quarter. Losses were led by the Investment, Banking, and Industrial sectors. AUM’s declined 10% to USD 3.75 bn in 4Q09.  

Kuwait Financial Centre “Markaz” was the top equity fund manager with an AUM of USD 752 mn, representing a 20% market share.

Top Five Fund Managers (in terms of AUM in Dec- 2009)

Qatar Equity Funds

Qatar’s Doha Securities Market (DSM) saw two consecutive quarters of gains; 33% in 2Q09 and 14% in 3Q09, however, the trend reversed in 4Q09 with the market recording a loss of 6.14%. This brought the Doha Exchange to a flat close with a gain of just 1%. All sector indices saw quarterly losses, the largest of which was in Banking & Financials, down 7.71% in 4Q09.  Liquidity was down on the Doha Exchange, with value traded ending the year at USD 26 bn, an annual decline of 46%.

AUM’s for Qatari equity funds decreased 7% in 4Q09 to USD 155 mn.

Other GCC Equity Funds

UAE Equity Funds - Dubai (DFM) underperformed the Abu Dhabi Exchange (ADX) for the quarter, losing 17.68% versus a loss of 12% for the ADX. Full year gain on the DFM was 10% versus 14.79% for the ADX. The DFM’s loss was led by the Investments & Financials sector which was down 26% in 4Q09. Abu Dhabi’s quarterly loss was led by the Real Estate and Construction sectors which were down 24% and 21.5%, respectively, in 4Q09. Liquidity in the UAE was down; value traded on the ADX was down 77% in 2009 to USD 18.9 bn while the same on the DFM contracted by 24% to USD 47.6 bn.

AUM’s for UAE equity funds contracted 11% in 4Q09 to USD 611 mn.

Oman Equity Funds - The Muscat Securities Market (MSM) lost 3% in 4Q09 after clocking in substantial gains in the second and third quarter of 22% and 17%, respectively. The market ended the year with a 17% return, i.e. the second best performer within the GCC. AUM’s for Omani equity funds were flat at USD 65 mn for 4Q09. The majority of Omani funds underperformed the index in the fourth quarter.

Bahrain Equity Funds - The Bahrain Exchange showed another year of losses, closing out 2009 with a decline of 19%. In the fourth quarter, the index was down 6% making it the fourth consecutive quarterly loss. Sectoral returns were mixed, from a high of 12% for Hotels & Tourism to a low of -8% for the Investment index. SICO Selected Securities Fund outperformed the benchmark, MSCI Bahrain index, which lost 13.4% in 4Q09.

Bahrain AUM’s were at USD 19 mn in 4Q09.

About Markaz

Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD960 million as of September 30, 2010, 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.