|11-03-2014, 07:37 AM||#1|
Gulf Investment funds bullish on markets despite dip in oil prices
Fund managers are optimistic about most Gulf stock markets despite declining oil prices, as valuations are now healthier after the sharp selloffs, according to the latest Reuters monthly survey of asset managers in the region.
If the oil drop is sustained for a longer time, Gulf economies’ current account surpluses will notably decline and Saudi Arabia’s government budget will fall into deficit, and most markedly, earnings of petrochemical companies in the region will suffer.
But fund managers seem to think little of that, as Gulf States have enormous reserve so that they will not be hit that hard, and history indicates that there is only low correlation between the market performance of Gulf stocks and oil prices.
Correlation between Brent crude oil and main stock market in the Gulf is fairly little, with only petrochemical company shares showing some correlation.
The survey found more than 47% of regional fund managers intending to increase their equity allocation in the next three months. Only 20% are expected to decrease allocations.
Investment managers are most optimistic on Saudi Arabia and the United Arab Emirates.
Third-quarter corporate earnings in the region have been generally strong and continue to indicate solid underlying fundamentals and strong economic growth in most of the Gulf States.
Also, a picked in initial public offering activity across the region, after a near five-year hiatus, is positive for the region, as it would attract fresh investor money.
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