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Dubai: Funds focused on Oman and Qatar have led the way this year, sweeping the region's top gainer list.
Both the Doha Securities Market (DSM) and Muscat Securities Market (MSM) have risen steadily while some of the more stalwart markets have had an uneven ride and pulled back from gains made earlier this year.
Vision Emerging Oman Fund was the leading fund in year-to-date terms, posting 30.61 per cent returns to May 13, outperforming its benchmark MSM index by nearly five per cent.
The MSM 30 rose steadily in May after bouncing back with robust gains of 11 per cent in April after posting a slight 2.5 per cent drop in March.
"Investors were neglecting the Muscat market because of its low liquidity and daily volume of around three million riyals last year - now it has touched 16-20 million riyals daily," says Hussain Al Lawati, vice-president of asset management at Vision Securities, which manages the fund.
The MSM has been trading at a P/E range of 15x with average growth in earnings of 16 per cent for the past two years.
"Given 18 per cent growth in earnings and factoring no further expansion in valuation, we expect MSM to range between 9,000-9,500. Still, on a PEG (PE/growth) of one and increased visibility of earnings for 2009, we believe the MSM 30 index could get to 11,600 levels," said Vision in a February report.
By May 25, MSM was already hovering at 11,494 with a price-to-equity ratio of 16.55.
Lawati thinks MSM could rise further as investors show more confidence in the market and a number of financial institutions are looking to invest. "We believe that the increased liquidity available and expansion of MSM companies till 2009 and 2010 will ensure earnings growth."
Mashreqbank's Makaseb Qatar Equity Fund was the second big winner, posting a 27 per cent YTD return by May 14, with its benchmark Doha Securities Market (DSM) rising by a little over 25 per cent.
Indeed, the DSM was the Gulf's best performing market with month-on-month returns of 18.2 per cent in April, driven by a strong corporate story.
Qatari companies are also looking to shore up interest from international investors and embarked on a road show in New York in May to tell their success story.
Foreign requests
"As a fund manager I receive so many requests from western markets who now believe in the Qatar story and its prospects," says Reda Jooma, the Makaseb fund manager, pointing to the first quarter results of listed companies as an indicator.
Q1 earnings of the 42 listed Qatari companies stood at 6.78 billion riyals, showing a significant growth of 72 per cent over the same period last year.
The Qatari financial services sector is also on the investor radar as many banks are expanding their capital base and have announced plans to raise rights issues in 2008 and 2009. Qatar National Bank, the nation's largest, has already raised its share capital through rights issue in two phases in October 2007 and April.
This expansion is likely to continue. "Qatar has raised its LNG producing capacity, which means that in 2008 and 2009 the proceeds for LNG will increase significantly, which will enable the government to finance more projects," says Jooma, who expects the market to grow by at least 25 per cent. "Its impact will be felt on infrastructure companies, energy, banks and utilities and other economic sectors."
- The writer is managing editor of Zawya.com
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