Large cap GCC equities set to deliver in 2013, says SICO Bahrain

Posted on February 22, 2013 by j.brockett

GCC equities will generate returns of 10-15% in 2013 with large caps having the best prospects, a report from Securities & Investment Company (SICO) Bahrain has predicted.

The investment bank’s GCC Equity Markets Outlook report said that the 2012 trend of small-to-medium sized companies outperforming their larger counterparts was set to be reversed this year.

“Large cap stocks, which had a subdued performance in 2012, are expected to outperform small cap stocks in 2013,” said the report.

Fundamentals are currently looking promising and the steady improvement in corporate earnings since 2009 has not yet been reflected in many valuations, the report argued. GCC banks are particularly well positioned as their asset position remains strong, the report noted.

“The asset quality of banks is currently better than previous years, leading to lower provision charges and higher net profits. GCC banks are well-capitalised and have ample liquidity, and are thereby capable of meeting increased domestic lending needs, driven by higher government spending on infrastructure and industrial projects. The regional project pipeline remains strong at about $2 trillion, and has grown by nine per cent year-on-year, implying a backlog equivalent to twice the GCC’s total current GDP,” the report said.

However, the SICO report also noted that foreign portfolio investment in the region has not yet picked up. GCC markets, excluding Bahrain, witnessed net foreign investment of US$ 0.81 billion in 2012 compared with an outflow of US$ 1.31 billion in 2011. Lack of interest from foreign institutional investors is set to continue, while retail investors will continue to dominate in the Saudi market, the report said.

Oman’s Ahlibank to launch Islamic fund

Posted on February 21, 2013 by j.brockett

Oman’s ahlibank will launch its first Islamic fund for the MENA region following approval from the Central Bank of Oman and the Capital Market Authority (CMA).

Abdulaziz al Balushi, chief executive officer of ahlibank, told the Times of Oman: “We are planning to raise the fund from Oman and other Gulf Cooperation Council (GCC) countries, using the facilities of our group institutions.”

The initial sum raised by the fund, whose size has not been disclosed, will be invested primarily in Oman as well as in a portion of the Gulf.

The CMA has provided the bank with a list of Sharia-compliant companies for the investment of the corpus.

The announcement follows Oman’s recent consultation on Sukuk reform in line with plans to introduce Islamic Finance, as reported by Mena FM.

According to a recent Thomson Reuters survey, investors are planning to inject $200m into their portfolios this year and sukuk will represent 35% - 40% of this allocation.

Policymaking concerns hold back GCC ratings

Posted on February 15, 2013 by j.brockett

Economies in the Gulf Co-operation Council (GCC) remain strong, but their ratings are constrained by structural challenges and policymaking concerns, according to a report from Standard & Poor’s.

The ratings agency said that the Gulf countries will remain ‘insulated’ from global and regional headwinds and forecast 4.6% growth across the GCC in 2013.

Ratings for the six economies were given a stable outlook, but S&P noted weaknesses remain that are constraining their assessments going forward.

“There are still particular shortcomings in the effectiveness and predictability of policymaking in the GCC,” S&P’s credit analyst Dima Jardaneh said.

“Weaknesses include the quality of policy debate; the strength and depth of institutions; transparency of decision-making; data monitoring and reliability of information; legal frameworks and the rule of law; and succession risks.”

The report noted that government debt burdens in the GCC remain at relatively low levels. Bahrain has the largest debt in the region at 34% of GDP, while Qatar’s debts amount to 29% of GDP.

The GCC’s monetary flexibility is weak because shallow local currency debt markets constrain the transmission of policy into the financial markets, S&P added. This can hinder attempts to broaden output away from oil and diversify sources of funding for small and medium sized enterprises.

“Fixed exchange rate regimes, the lack of independent monetary policy, and weak local currency instruments largely constrain the transmission of policy,” said the report. “These attributes and open capital markets largely shape GCC monetary frameworks. Nevertheless, the countries’ open economies with their easy flow of goods and labour have largely underpinned the fixed exchange rate as a credible nominal anchor”.

Subscription extended for Oman’s first Shariah fund

Posted on February 13, 2013 by j.brockett

The initial subscription period for Oman-based Vision Investment Services’ new open-ended Shariah compliant investment fund has been extended by one month, Mena FM has learned.

The Vision Al Khair GCC Fund, open to both Omani and non-Omani investors, was due to close to initial subscription applications on 10 February but will instead end on 10 March.

The initial subscription period commenced on 10 January and has been open to individuals, companies, institutions, pension funds, and government organisations.

The new fund, which will have a minimum size of RO 2 million, is Oman’s first Shariah-compliant investment fund and will invest in listed securities in the GCC and Mena region which are compliant with Islamic Shariah principles.

Shariah advisory and audit services provider Shariyah Review Bureau (SRB) has been appointed to ensure the fund’s structure complies with Shariah guidelines.

NBAD seeks to reach Chinese investors with ICBC deal

Posted on February 13, 2013 by j.brockett

The National Bank of Abu Dhabi (NBAD) has signed a partnership with ICBC (Asia) Investment Management which will help it reach the growing number of wealthy Chinese investors.

Under the Memorandum of Understanding with ICBCAIM - the overseas investment management arm of the ICBC Group – both firms will jointly facilitate the marketing of their respective investment capabilities through their distribution channels.

NBAD will help market and distribute ICBCAIM’s private equity and fixed income products in the UAE, while ICBCAIM will do the same for NBAD’s Cautious Income Fund and Dividend Leader Fund in Asian markets.

“This partnership allows us to expand the reach of our investment products, especially in Hong Kong which is the centre of Asian commerce and the international gateway to China,” said Alan Durrant, Group Chief Investment Officer and General Manager of NBAD’s Asset Management Group. “NBAD offers a range of innovative and distinguished investment vehicles and we would like to expand our channels of distribution, particularly in the growing markets of Asia. In the past few years, investors have generally been cautious; still, investors’ trust in the market is gradually recovering. Given the diversity of investors’ appetite, we believe the Cautious Income Fund and Dividend Leader Fund, which offer attractive dividends with low level of risk, would be well positioned in Asia.”

ICBC Group is the largest bank in China and the world’s largest bank by market capitalisation. Its asset management arm has over $140 billion in assets under management.

Jack Chang, CEO of ICBC (Asia) Investment Management, added: “ICBC (Asia) Investment Management places high importance in our cooperation with NBAD given the fast growing trade and investment flow between the Gulf region and China. Our parent company ICBC Group is currently expanding its network in the Gulf region and we expect significant increases in capital flow between the two regions.”

NBAD Asset Management currently has an AUM of around $1.4 billion.

Bahrain economy ‘steadily consolidating’

Posted on February 12, 2013 by j.brockett

The Bahrain economy enjoyed a year of steady consolidation in 2012, with its non-oil sector making significant progress, according to the latest Economic Quarterly Report from the Bahrain Economic Development Board (EDB).

First estimates indicated that overall growth for the country in 2012 was 3.9%, building on confirmed figures of 4.4% annualised growth for the first three quarters, said the report. All main sectors of the economy registered positive growth while there has also been a significant increase in lending by Bahraini retail banks.

The strengthening of the short and long-term picture for the Bahraini economy was reflected in the fact that Standard & Poor’s recently revised its outlook on the Kingdom from ‘negative’ to ‘stable’. Growth hopes for 2013 are pinned on large-scale industrial investments and infrastructure spending.

Commenting on the report, Kamal bin Ahmed, Minister of Transportation and Acting Chief Executive of the Bahrain Economic Development Board (EDB), said: “The latest Economic Quarterly report demonstrates that Bahrain’s economy continues to strengthen and after achieving solid growth in 2012, the economy is well-positioned to continue to achieve steady and sustainable expansion in 2013 and beyond.

“In particular, the Kingdom plays an important role as a gateway to the rapidly expanding GCC economies, and the opportunity this offers for investors is demonstrated by the strong performance of key non-oil and gas sectors.”

DVK Group to launch Shariah-compliant fund targeted at women

Posted on February 11, 2013 by j.brockett

DVK Group, an international commodity trading and financial boutique, has announced plans to launch a Shariah-compliant fund targeted at women in the Gulf Cooperation Council (GCC).

The multi-asset DVK GCC Shariah Women’s Fund, which has a capital target of up to $500m, will look at sectors including aviation, banking and financial services, trading of bulk commodities and private equity.

DVK, which recently launched in Saudi Arabia and boasts a member of the Saudi royal family as non-executive chairman, is in talks with senior figures in Qatar and Saudi Arabia to finalise the launch of the fund.

Deepak Kuntawala, the company’s founder and chairman, believes that a fund focused on women in the Middle East will find good opportunities for both organisers and investors.

“During all my trips and interaction with the GCC, we recognised there was a huge potential with respect to women,” he said. “There are some very inspiring leading women spearheading outstanding businesses.”

He said the fund could help overcome Western preconceptions about Islam, adding: “I was inspired by the religion which really does elevate women and has great business ethics at the core.”

DVK Group cites figures from Gulf One Investment Bank which show that Saudi women have around $6bn in deposits in local banks and own approximately 40% of real estate. The new fund will attempt to reach this relatively untapped pool of investors.

The firm, founded in 2001, also offices in London and Hong Kong and has a global presence in Europe, Africa, South America the Far East and the Baltic States.

Mena holding companies ‘to be boosted by government spending’

Posted on February 6, 2013 by j.brockett

Banks and holding companies will be among the most attractive listed equities in the Mena region this year as most GCC countries members announce plans for large scale government expenditure, according to a report from Al Masah Capital.

In their Alternative Investment Strategy 2013, the Dubai-based firm highlighted four key markets, including holding companies, banking, utilities and chemicals, which they say provide opportunities for positive returns.

Akber Naqvi, executive director at the firm, believes “the holding companies sector holds the most potential” with the ability to pay steady dividends to those seeking regular income.

“An offshoot of the massive government spending is that industries other than manufacturing are starting to grow rapidly because income distribution is becoming more widespread,” he said.

“If the logic to the spending is to bring unemployment down, make the standard of living more affordable, and allow more people to feel good about themselves, then holding companies are going to benefit immediately as they have exposure to a variety of sectors and services,” he added.

Stocks of companies the alternative asset management firm highlighted include First Gulf Bank, Commercial Bank of Qatar, Banque Saudi Fransi, Saudi Arabian Fertilizer, Industries Qatar, Yanbu National Petrochemicals, Kuwait Projects, Qatar Gas Transport, Saudi Electricity, and National Industrialisation.

Al Masah, through their various funds and portfolios, maintain exposure to all these companies and continue to manage these positions.

“Any new funds and portfolios that we launch will also find allocations towards such companies,” Naqvi said.

Delta Partners reaches $100m target for emerging markets fund

Posted on February 6, 2013 by j.brockett

Delta Partners Capital has announced it has completed the first closing of Delta Partners Emerging Markets TMT Growth Fund II following capital commitments of $100m.

With a target size of $350m and a hard cap of $200m, it will invest under strict environmental and social standards in areas including the Middle East.

The vehicle, which may also invest in debt securities that have equity-like returns, will focus on investment opportunities in technology, media and telecommunications (TMT).

Geoffrey D. Fink, managing partner and head of investments, said: “We are delighted to have met our first-close target and to have attracted a world-class group of institutional anchor investors to the Fund.”

He added: “We believe that given our depth of expertise in TMT and extensive on-the-ground presence across emerging markets we are uniquely positioned to identify and execute on attractive opportunities in this dynamic sector, and to provide tangible added value to our portfolio companies.”

Domiciled in the Cayman Islands, the 10-year fund is sponsored by Delta Partners Group and has first-close investors including IFC (World Bank Group) which has invested $20m.

Additional investment comes from mobile phone operator NTT DOCOMO and a number of family offices from Europe and the Middle East.

Delta, which is headquartered in Dubai, has offices in Johannesburg, Singapore and Barcelona and has plans to open a new office in Latin America.

NBAD launches offshore retirement plan for UAE expats

Posted on February 5, 2013 by j.brockett

The National Bank of Abu Dhabi (NBAD) has become the first UAE bank to launch a retirement savings plan for expatriates, via an offshore corporate trust offered by a subsidiary.

The Wealth Builder Plan is aimed at UAE domestic and multinational companies who want to offer expatriate employees pension saving to underpin the traditional end-of-service benefits offered in the UAE. It will be run by NBAD Trust Company (Jersey) Ltd, which is wholly owned by NBAD, with a range of investment fund options provided by NBAD Asset Management.

The retirement schemes will be tailored to each client, with regular contributions either solely made by the company or made jointly by employer and employee. Employees can choose the investment plan that suits their risk appetite, and both employers and employees have access to web portals where they can access account information and investment performance.

Samira Zakour, the Chief Marketing Officer of NBAD Trust Services, says: “By offering employees a cost effective and professionally managed savings solution, employers will be able to demonstrate that they have the long term interests of their staff in mind. This will have a powerful and positive impact on their ability to recruit and retain high quality employees.”
Individuals will be able to use the Wealth Builder Plan to gain access to investment funds that would normally only be available to institutions. The trust structure is also intended to give employer and employees peace of mind, as retirement funds are held independently from the employer. NBAD Trust Company (Jersey) Limited will act as trustees and the administration will be carried out by RBC Corporate Employee and Executive Services.

Alan Durrant, Group Chief Investment Officer and General Manager of NBAD’s Asset Management Group. said: “NBAD will be providing well balanced investment funds as the core of our Wealth Builder Plan service. Our performance and service has been recognised in a host of recent UAE and regional awards. Employers and their employees can be assured that their savings are being managed in experienced and diligent hands.”
If this model of retirement plan becomes popular in the UAE it could provide a shot in the arm for the local and regional asset management industry. Expatriates account for around 88% of the UAE’s population, and their retirement plans could be a fast-growing source of investment in the coming years.