GCC equity funds continue upward trend

Published November 18th, 2009 - 03:48 GMT

The latest Fund Market Insight Report from Lipper, a Thomson Reuters Company, for the Gulf Co-operation Council (the GCC) countries reveals that equity funds registered for sale in the GCC continued the upward trend noticed during the second quarter gaining 16.31% on average, bringing year-to-date performance to almost 39%.

As of the end of September 2009, almost all Lipper equity categories ended the quarter on a positive note, with the sole exception of funds invested in Kuwait, which lost 0.39%. This was mainly due to the negative performance of the Kuwait Stock Exchange during third quarter 2009; the index decreasing 2.89%.

Conversely, funds invested in emerging markets remained the best performers of the quarter. Equity Indonesia gained 33.74%, Equity Russia increased 32.75%, and Equity Emerging Markets Europe rose 30.21%. Focusing on funds invested in the GCC, Equity United Arab Emirates recorded the best return, posting a 22.64% quarterly return.

UTI International India IT was the best performing fund registered for sale in the GCC over the quarter, gaining almost 46%. Twelve of the 20 top-performing funds in the region were funds invested in emerging markets, particularly India and Russia. Five funds among the top 20 were invested in Europe, as illustrated by Invesco Continental European Small Cap Eq USD A, which increased nearly 40% for the quarter.

Of GCC-domiciled funds, those invested in Asia Pacific ex Japan topped the Lipper equity category returns, posting a 23.86% gain, followed by funds invested in the UAE, which gained 22.64%.

The ADCB MSCI UAE Index registered the best performance of the quarter, increasing
34.77%. This Emirati-domiciled fund, managed by Abu Dhabi Commercial Bank, benefited from the positive return of the Emirati markets. Its investment strategy consists of providing investors the MSCI UAE index return.

The 212 Shari’ah-compliant funds covered by Lipper and registered for sale in the GCC increased 6.11% for third quarter 2009, bringing year-to-date performance to 13.27%.

As noticed during the first half of 2009, conventional funds, gaining 12.87% for third quarter 2009, performed clearly better than their Islamic peers. This situation is mainly ascribable to the lack of Islamic funds invested in emerging markets, which were by far the best performers during the quarter.

Unsurprisingly, equity funds topped the ranking, recording 9.13%, boosted notably by the emerging markets bounce: Equity Emerging Markets Global rose 18.04%, and Equity India increased almost 18% for third quarter 2009. Conversely, money market funds posted the lowest return, remaining flat by posting a marginal gain of 0.06%, dragged down by plummeting Kuwaiti money market funds, which tumbled 2.76% for third quarter 2009.

NBAD UAE Islamic-Al Naeem was the best performing Shari’ah-compliant fund during the quarter, increasing 20.80%. This Emirati fund, managed by the National Bank of Abu Dhabi, benefited from its great exposure to the Emirati financial markets.

In a commentary, Merieme Boutayeb, Research Analyst for Lipper, said:  “After an upbeat second quarter GCC markets continued their upward trend during the third quarter. Five of the seven regional markets recorded positive double-digit returns, contributing to a global recovery after the heavy losses witnessed during the first quarter and moving these five markets to positive territory for the year-to-date. The exceptions were the Kuwaiti and Bahraini markets, which lost 2.89% and 1.71% respectively.”

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