Markaz international products outperform their benchmarks YTD


Markaz announced that its international products outperformed their benchmarks as of the end of May 2009, owing to opportunistic investing and dynamic asset allocation.

The Emerging Markets Thematic Fund, which invests in a portfolio of globally diversified equities with a focus on select themes, returned 14%. Atlas Diversified Class, which seeks to obtain consistent returns with low volatility by investing in a portfolio of global securities and financial products, and ETFs Program which seeks to achieve out-performance of broad market and sector indices by allocating its assets into various Exchange Traded Funds returned 10% and 16% respectively, beating the respective benchmarks by a handsome difference.

Mr. Gopal Menon, Executive Vice President of International Investments and Investment Advisory said “Our well-known conservative approach towards investing, thorough due-diligence procedures and dynamic asset allocation approach have paid off as the team managed to sail through the global financial crisis relatively unscathed. And the results of it are quite visible in the YTD returns of 2009 with all our portfolios reigning in the positive; generally, we believe the worst is well behind us. The first half of the year is coming to a close. And the year thus far has seen very interesting developments, particularly, the expectations made a dramatic turnaround. At the start of the year, it was a common perception that markets will continue to be grim in 2009 and any turnaround was likely only towards the end of the year or in 2010. Such expectations were belied and the ability of markets to surprise was once again witnessed. On March 10th, it all started out as a bear rally, but which hasn’t lost steam as yet.”

Bull Market Rally or a mere market correction?

What remains to be seen is whether it can be classified as a bull market rally or as a mere market correction on the upside. In this context, it is important to note the influence of the economic developments on the market movements and how this could shape the direction of the markets going forward. There were a few key points which acted in confluence for a full-fledged rally to begin. One of them is the news flow coming in from major Wall Street firms that they would be able to repay their borrowed sums (TARP) in quick time. Also, they came forth mentioning that they were witnessing profits for the then two months of 1Q09. Besides, news flow relating to many economic indicators were reported as either “stronger-than-expected” or “shrinking at a slower pace”, implying that the bottom’s nigh.

Strong economic indicators

In US, housing data indicated that there has been an increasing appetite to buy previously owned homes. Mortgage rates are on a rise after hitting a low in April. But what is of importance is that the latest data on refinancing applications has fallen owing to the rising mortgage rates. Construction spending growth data has seen an uptick both in March and April, last seen in September’08. The US Consumer confidence index posted a huge jump in May, rising up to 54.9 (1985=100), up from 40.8 in April. After two months of significant improvement, the Consumer Confidence Index is now at its highest level in eight months (the jump in May represents the largest in 6 years). ISM Manufacturing at 43 levels, though well below 50, has improved significantly from the December low of 32. So is the case with the non-manufacturing ISM index which is inching closer to 45, after dropping to below 40 levels. Unemployment rise is slower than expected, with fewer claims being filed for jobless benefits. Also, record drop in inventories continuously for the last 8 months is likely to set a stage for a comeback in growth to fill up the stockpiles. And any kind of deflationary concerns have more or less vanished what with inflationary trends possibly resurfacing in the near term owing to huge money supply injections from the US government. Besides, drastic interest rate cuts from central banks across the board to boost growth have paved way for cheaper credit.

Also, the year witnessed continuing efforts from central banks to bolster their economies through injection of stimulus packages. Unconventional measures of reviving the economy were utilized. For example, ECB recently announced its plan to purchase EUR 60bn of covered bonds, coming on the heels of similar measures from BoE and Fed. The purchase is intended to improve market liquidity and ease funding conditions.

Is it really that rosy?

What is worrisome is the fact that while on one hand, the US savings rate is improving and outstanding consumer credit is decreasing, on the other hand, the number of credit card delinquents has been increasing, with the 30+ number reported at an all time high of about 5.8-5.9%. How do we interpret this? If the data is reliant enough, then we are probably in for a protracted slowdown, one which could get dragged for a long period of time. Or maybe, a credit crisis of a different origin and dimension is snowballing, waiting to be discovered! Given a choice, we believe the former is likely as we have faith in the ability of central banks and institutions alike to avert any possible crises in the immediate future on the back of learning from the current crisis.

Emerging Markets … A new growth story

Mr. Bisher Anwar Al-Bisher, Senior Analyst, International Investments and Investment Advisory Department, Markaz said “The BRIC markets staged a dramatic turnaround during the year. While Brazil, China were in the positive since the beginning of the year and are up about 41% and 55% respectively on YTD basis, the star markets since the March 9th low were India and Russia, which topped the other BRIC economies, posting a YTD return of 57% and 84% respectively. Is the case of ‘decoupling’ on? Well, looks like it is, but it is still early days to make a firm comment.”


Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of KD 781 millions as of 31 March 2009, 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.

Photo Caption: Mr. Gopal Menon, Executive Vice President and Mr. Bisher Anwar Al-Bisher, Senior Analyst, of International Investments and Investment Advisory, Markaz