Funds Global MENA asked ATAF AHMED, HEAD OF ASSET MANAGEMENT – QINVES, for his assessment of the past year and his predictions for the coming 12 months.
What is your outlook for investments in the MENA region
over the next 12 months?
We expect the region to continue to witness volatility
over the next 12 months, with oil stabilising between
$70-$80. However, regional markets continue to demonstrate
their resilience in the face of macroeconomic
headwinds.Historically, the main driver for market
performance has been higher oil prices and index-related
events. Looking at the top performers within the MENA
region over the past year, the standouts have been
businesses in Qatar and Saudi Arabia.Qatar’s market has
been pulled higher as the increase in foreign ownership
limits result in an increased weighting for some of its
largest stocks within emerging market indices. Within
Saudi Arabia, the impending MSCI reclassification has
resulted in significant investor positioning. We have also
seen entities which benefit from higher oil prices, such
as those operating in the petrochemical sector, post
strong returns.Looking ahead, we see much higher
dispersion within markets, especially Qatar, as new
companies see their foreign inclusion factor lifted by
index providers, resulting in higher weightings for
companies such as Mesaieed Petrochemical, Barwa and Qatar
Fuel. For Saudi Arabia, the final inclusion may act as a
positive catalyst for markets, although typically this has
already been priced in and a brief correction could be
experienced.
What are your top investment concerns?
Three concerns which require close monitoring are
continued geopolitical tensions, the rising strength of
the US dollar and current stock valuations.Historically,
the region has suffered tremendously from geopolitical
volatility. Within the last 18 months, we have witnessed
the imposition of the blockade on Qatar, intensifying
international pressure on finding a solution in Yemen and
renewed tensions related to Iran. While these events have
not dampened international investors’ appetite to date,
they may continue to cause concerns amongst investors in
the coming year and beyond.In addition, if the US
continues its rate-rising trajectory, we anticipate a dual
impact on the region. A stronger US dollar will have a
negative impact on oil prices which will negatively impact
regional fiscal strength as government revenues decline.We
may also see investors rotate out of emerging markets,
which could see selling pressure on those regional markets
included in the emerging markets exchange traded
funds.Finally, valuations today are somewhat stretched as
a result of index related activity. Further significant
multiple expansion is unlikely, so future growth will have
to derive from earnings performance. We therefore need to
see real growth to sustain the current valuations.
Are you planning any product launches in the MENA
region? If you have launched a product in this region in
the past 12 months, please give a performance review and
your expectations.
Earlier this year, the Ijarah platform launched the
QINVEST SQN Income Fund III, which was significantly
oversubscribed in the offer period, raising $65 million.
The platform has now grown to $165 million in less than
two years, paying investors a healthy distributed yield on
a monthly basis. In Turkey, the team benefited from
volatility in the markets and continued to deliver top
quartile performances.