Alternative asset manager Al Masah Capital Management may invest in Egyptian stocks once political unrest there has stabilised as the recent sell-off has made valuations attractive, its fund manager said.
Masah's Special Opportunities Fund, with $140 million in assets under management, escaped the slump by staying in cash.
"The fact that we managed to escape the drop, we might now, depending on how things span out, turn buyers," the fund's manager, Akber Naqvi, said in an interview. "There are some companies with very attractive fundamentals there."
Egypt's main stock market index is down 21 per cent this year. Financial markets there have been shut for the past eight working days after protesters took to the streets calling for an end to President Hosni Mubarak's rule.
The bourse will reopen on Sunday, Feb. 13.
Egypt stocks may rally once trading resumes on the Cairo bourse as bargain hunters step in following steep declines which saw the market drop 16 per cent in two sessions.
Naqvi said the fund was bullish on petrochemicals and telecoms in Egypt as the sectors could benefit from the long-term impact of the crisis.
The fund may look at selling investments in the United Arab Emirates and Kuwait and allocate the money to Egypt, he said.
"The UAE (market) has structural problems and its volumes are low. Kuwait, to a certain extent, is more expensive than others," Naqvi said.
The fund was still bullish on Qatar, the Gulf Arab state that recently won a bid to host the football World Cup in 2022 and Saudi Arabia, the top-oil producing country, he said.
Recent events in Egypt will hamper investor sentiment and may deter foreign investors just beginning to look at the region after shunning it in the past two years, Naqvi said.
"When sentiment takes over, the fundamentals go out of the window. Regardless of how fundamentally attractive a stock is or how technically good it looks on the charts, sentiment overwrites that," he said.
Naqvi said some international investors had booked profits from a two-year rally in big emerging markets like India and China and may have allocated money to the Gulf Arab world as these markets have underperformed in the past few years.
"Investors had locked in money from emerging markets and were looking to invest in this region but now that has stopped, or slowed or even reversed," he said.
The frontier markets of the Gulf, perceived to be riskier than emerging peers, saw little inflows in 2010, while emerging markets saw more than $90 billion flow in during last year.