GCC markets had a positive start to the year, after ending 2009 with a red quarter amid negative corporate news.
The first quarter of 2010 was led by healthier corporate earnings, stronger economic outlooks and more positive corporate news.
The MSCI GCC index gained 12 per cent in the first quarter this year after losing eight per cent in the previous quarter, according to a new report on GCC Equity Funds by Kuwait Financial Centre (Markaz). It said all MSCI GCC constituent indices saw gains in the first quarter, except for MSCI Bahrain, which lost 3.86 per cent. The largest gain was in MSCI Kuwait, which was up 19 per cent for the quarter on the back of positive news flow from Zain.
With an increase in confidence levels, March 2010 saw fund managers maintain their exposures to the GCC markets, favouring Saudi Arabia and Qatar, at 43 per cent and 16 per cent, respectively, it said. "Confidence in the Kuwait market has declined dramatically, from 20 per cent in June to 11 per cent in March 2010," the report highlighted. It added that fund managers decreased their asset allocation to the UAE from 17 per cent in September 2009 to 11 per cent in March.
In the same month, fund managers decreased exposure to cash to seven per cent and had 93 per cent in equities, on the back of better investor sentiment. Exposure to bonds was nil.
This change is based on asset-weighted average, reflecting a higher risk appetite from local and foreign investors, the researchers at Markaz said. The research also pointed out that all top three conventional and Islamic funds outperformed their benchmarks.
As far as conventional GCC funds are concerned, Markaz research showed that preferred equity holdings were Sabic, Al Rajhi Bank, Industries Qatar, NBK and Zain, suggesting a large cap strategy for most of the funds.
Among Islamic GCC funds, the top three Islamic funds outperformed the MSCI GCC Islamic Index, which gained 9.7 per cent in the first quarter.
Jadwa Arab Markets Equity Fund topped the charts with a quarterly gain of 13 per cent. The fund favoured Saudi Arabia in March with a 57 per cent allocation, followed by Kuwait with 15 per cent. The fund's top holdings were Sabic (11.8 per cent), Al Rajhi Bank (10.6 per cent) and Safco (7.65 per cent).
Among Islamic funds, the preferred holdings were Al Rajhi Bank, Industries Qatar, Sabic, Kuwait Finance House and Etihad Etisalat. The top three Islamic funds did not have an exposure to Etihad Etisalat, but shared exposure to two of the top holdings.