By Saghir Aslam
(The following information is provided solely to educate the Muslim communityabout investing and financial planning. It is hoped that the Ummah will benefitfrom this effort through greater financial empowerment, enabling the communityto live in security and dignity and fulfill their religious and moral obligationstowards charitable activities)
Daman Investments is slowly increasing its exposure to Saudi Arabian equities as the country readies to open its market for foreigners and ahead of expected stability in crude oil prices in the second half to December.
The fund is currently 50 percent in cash, and 25 percent of the rest has been invested in UAE equities, with the remaining equally divided between Saudi Arabia and Qatar.
“We have been increasing our exposure to Saudi Arabia. We have a big cash element as we trade opportunistically. And going forward Saudi will constitute a bigger portion of the Daman Fifth Fund”, said she hzad Janab, fund manager of the world’s top performing alternative mutual fund and head of asset management and advisory at Daman Investments.
“We are seeing a lot of GCC and UAE investors playing in Saudi Arabia ahead of the opening up of the market to foreigners. A lot of people are trying to get in and play that story and quite a bit is already in the price. We could get laggards to come in, looking to play just before it happens.
Liquidity is flowing to Saudi Arabia, which has led to drying up of volumes on the Abu Dhabi and Dubai markets as investors position themselves ahead of a potential opening up of the $560 billion Saudi stock markets to foreigners.
Saudi Arabia, which contributes 50 percent of the GDP of the Middle East and North Africa (Mena) and 50 percent of market capitalization of the region, is keen on removing impediments to foreign investors in one of the world’s most restricted major stock exchanges as it pursues a $130 billion spending plan to boost non-energy industries. The opening of the stock market could boost inflows of up to $40 billion, industry participants say.
This move would come even as the world’s biggest exporter of oil budgeted a deficit of 145 billion Saudi riyals due to falling crude oil prices.
Foreign investors with a minimum of 18.75 billion riyals (about $5 billion) of assets under management and at least five years experience in the business will be eligible to trade Saudi stocks, according to draft regulations issued by the capital markets regulator last year.
The regulator also plans to cap foreign ownership in single stock to 49 percent, with certain limits for qualified foreign investors.
This along with stability in crude oil prices is likely to trigger more upside on the Tadawul index, which was near 9,000 levels.
“If oil prices bounce back, I expect the Saudi market to pick up in the second half. Towards the end of the year, we expect the market to pick up after a lull during Ramadan.
Consumer discretion is a longer term theme that would continue to play in Saudi Arabia.
Saudi Arabia has a short term catalyst with the imminent opening up of the market. If oil prices bounce back, the petro-chemicals would recover faster than anyone else.
In the absence of important catalysts currently, the Dubai an Abu Dhabi indices have been stuck in a range.
“We have no big catalyst in the UAE by way of Market moving events; everybody was waiting for the dividend season. Local institutions remain on the sidelines. No one wants to step in yet, and no one wants to catch a falling knife. However, valuations are attractive in the UAE.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)