28th Jan 2019 11:38
LONDON (Alliance News) - Gulf Investment Fund PLC said Monday its performance in the fourth quarter was affected by the "steep" decline in oil prices, but it modestly outperformed its benchmark in 2018.
The Gulf Cooperation Council equities investor said its net asset value decreased 2.0% in the quarter ended December 31 compared to its benchmark, the S&P GCC Composite Index, losing 1.3%.
The fund said it paid a 3 cents per share dividend in the period, resulting in a NAV decrease of 4.4%.
For 2018, after dividend payments, the fund's NAV increased 8.4%, ahead of its benchmark gaining 8.2%.
Gulf Investments said the 35% drop in Brent oil price in the fourth quarter led to its own underperformance but Qatar equities, which saw a 4.9% gain, continued to outperform other GCC markets, which were all down in the quarter.
In 2018, Qatar equities gained 21%, followed by Abu Dhabi, up 12%, Saudi Arabia gaining 8.3% and Kuwait, up 5.2%. Dubai and Oman lost 25% and 15%, respectively.
Qatar's gain was attributed to positive foreign investor sentiment. It topped net foreign inflows in the region with USD2.5 billion, followed by Saudi Arabia with USD1.6 billion, Kuwait at USD927 million and Abu Dhabi with USD760 million. Dubai experienced its first net foreign outflows since 2011 with USD258 million.
The fund said: "Easing of restrictions on foreign ownership limits in Qatar, reclassification to the emerging markets index in Saudi Arabia and improving macro fundamentals helped in driving the GCC markets higher. Additionally, sturdy US dollar pegs, low debt levels, and robust foreign reserves reduced risk and shielded the region from the emerging market contagion, making GCC an attractive investment destination for global investors."
Gulf Investment remains overweight, compared to its benchmark, in Qatar - with 38% of NAV held Qatari equities. The fund's weighting to Saudi Arabia, Kuwait and United Arab Emirates was 44%, 8.5% and 8.3%, respectively.
As for sectors, Gulf Investment's portfolio had a 55% weighting in Financials. The fund said: "GCC banks have strong balance sheets & government backing. Credit growth is expected to recover as government spending underpins economic activity and spurs private-sector growth.
"Pressure on profitability should ease as banks have adapted their cost base to the slowing economic environment, and as ongoing consolidation in the sector takes effect."
The fund decreased its exposure to the Materials, Energy, Utilities and Real Estate sectors in the period.
Gulf Investments added:" GCC economies are looking forward to 2019 as a year of progress, with all governments setting expansive budgets despite recent softness in oil prices. The GCC is expected to grow at 3.0% in 2019 led by investment projects in Saudi Arabia, the five-year development plan in Kuwait, ongoing preparations for Expo 2020 in the UAE and FIFA 2022 in Qatar.
"With large investments over the next few years, we expect to see investment opportunities in sectors such as banking, infrastructure and industrials. The key risk remains the direction of oil prices, which if they drop further, will limit spending by governments in the region. The investment adviser remains positive on growth in the region, led by the planned infrastructure projects and the momentum of reforms across nations."
Shares in Gulf Investment Fund were up 1.8% Monday at USD1.13 each.
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