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Dubai: So how did fund managers fare during the tumultuous first half of August? Thankfully, most of them were away for the summer as the Saudi Tadawul tumbled 5.16 per cent, Abu Dhabi 8.4 per cent, Cairo 10 per cent, Dubai 7.26 per cent and Doha 5 per cent in the first few weeks of the month. Nearly a quarter of the funds tracked by Zawya Funds Monitor managed to stay in the green, but overwhelmingly they were in the red for the month.
So what did fund managers do in the face of such negative sentiment? "It was a time to sharpen the pencil and look at fundamentals and try to ride out the storm," says a Dubai-based fund manager.
The UAE markets also did not take kindly to the bad news emerging from Dubai's real estate market, which shook investor confidence. But much of the downturn was also driven by foreign investors who disappeared after booking their profits, leading to a meltdown.
I have sat down with many asset managers over the years who have decried the lack of institutional, international investors entering the market. Well, they did enter the market roundabout last year and now they are gone. So why did they not bring the much sought after stability to the market? "They will return, one outflow or inflow does not make the year," says a fund manager.
Indeed, there are indications that foreign investors will return, and in much larger numbers. A Merrill Lynch survey in early Aug-ust notes that 48 per cent of the fund managers polled expect emerging market corporate profits to be most favourable, much higher than any other markets.
In a related ML survey, 39 per cent fund managers expect Europe Middle East Africa (EMEA) to emerge as the most preferred equity market over the next 12 months, beating Asia and Latin America, by a hefty margin. Other research reports also suggest that international fund managers will be closely watching Gulf markets. Lyxor, a unit of French investment giant Societe Generale, suggests that as much as 45 per cent of British institutional investors think the Gulf markets offer "good" returns, with 5 per cent of that percentage believing returns will be "excellent".
Over the next three years, 50 per cent institutional investors expect to increase their exposure to the region, Lyxor said. As many as 70 per cent of the institutional investors polled think the region has massive potential and have little concerns over its political stability.
- The writer is managing editor, zawya.com
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