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Middle East fund managers remain positive despite events in Dubai

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While the events in Dubai during November took many fund managers in the Middle East by surprise, most are still positive on the prospects for the region, says Standard & Poor’s Fund Services in its latest annual review of the sector.

Interviews for the 14 S&P Fund Services-rated Middle East & North Africa funds took place in November and December 2009, around the time of the announcements relating to Dubai World and Nakheel.

“The news came as a surprise to just about everyone,” says S&P Fund Services lead analyst Roberto Demartini. “The managers we spoke to were largely expecting markets to rise. Most funds were fully invested after a period of holding larger cash reserves, and most managers were selectively going back in to the UAE. A common view was that with the oil price at USD70 a barrel, the economies in the region were poised for some stability and growth. An exception was Ibrahim Masood at Makaseb who still held significant cash reserves in the Arab Tigers Fund.”

Even after the events surrounding Dubai, the outlook for the Mena region remains positive.

“The view of Mujib Moosa of Markaz is typical. Moosa’s view on the prospects of the region is unchanged since before the events surrounding Dubai. A crisis of confidence is likely to keep some investors out of the region, but he believes there is a case for isolating the situation in Dubai from other countries where prospects are good. Moosa himself has had to do some hand holding, in particular with international investors,” says Demartini.

Elsewhere in the Mena region, Qatar, Saudi and Kuwait are seen by managers as areas still reaping the benefit of reasonably high oil prices. Qatar in particular seems to be where the consensus view is more positive, with Moosa’s view backed up by Shrish Raut at Bank Muscat and Shakeel Sarwar at Sico.

But there are still some question marks surrounding some of these countries. Most managers agreed on being out of or underweight Kuwait, with the exception of Amani Al-Omani, who runs the Kuwait-based Markaz team. Her view is that recent developments point to some more positive messages from the government, and that the agreement regarding Global Investment House’s debt could be a turning point.

“The recent announcements about Dubai have clearly had an impact on volatility and opened up some opportunities. The message from managers for the coming months seems to be one of extreme selectiveness,” adds Demartini.
 

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