25th Feb 2019 11:54
LONDON (Alliance News) - Gulf Investment Fund PLC said Monday its net asset value per share decreased in its financial 2018 first half but still managed to outperform its benchmark.
At December 31, Gulf Investment's NAV per share stood at USD1.1564 compared with USD1.1982 at June 30, a 3.5% decrease.
The fund's benchmark, the MSCI Emerging Markets Index, lost 9.7% in the six months to December 31.
In the period, Gulf Investments paid a dividend of 2.0 US cents per share, down from the 3.0 cents paid in 2017.
"During the six-month period, Gulf Cooperation Council markets were influenced by two main negative trends: a decline of 32% in the oil price and a significant fall in global markets during November and December. On the positive side, easing of foreign corporate ownership limits in Qatar and reclassification to the Emerging Market Index in Saudi Arabia were steadying factors," said Chair Nick Wilson.
Wilson added "We believe that these bearish trends will reverse and expect 2019 to be a year of progress for GCC economies, with all regional governments setting expansive budgets despite 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."
Although outperforming its benchmark, the fund's investment managers noted the S&P GCC Composite index grew 8.2% in the period, with Qatar equities rising 21% helped from the confidence from foreign investors. Abu Dhabi equities increased 12%, Saudi Arabia up 8.3% and Kuwait equities growing 5.2%.
Dubai and Oman were the big fallers, losing 25% and 15%, respectively.
The investment manager said: "Easing of restrictions on foreign ownership limits in Qatar, Saudi Arabia reclassification to the EM index, Kuwait's inclusion in FTSE EM Index 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 2018's emerging market contagion, making GCC an attractive investment destination for global investors."
The fund remains overweight, compared to its benchmark, in Qatar - with 38% of NAV invested in the country. The fund's weighting in Saudi Arabia, Kuwait and UAE at the end of the period was 44%, 8.5% and 8.3%, respectively.
Due to a change in investment policy, the fund now has 61% of its investments outside Qatar, compared to 10% at the end of 2017.
The investment manager added: "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."
Shares in Gulf Investment Fund were up 2.2% Monday at USD1.17 each.
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