TIDMGIF
RNS Number : 7943E
Gulf Investment Fund PLC
23 October 2018
Legal Entity Identifier: 2138009DIENFWKC3PW84
23 October 2018
Gulf Investment Fund plc ("GIF" or the "Company")
Q3 2018 Investment Report
Gulf Investment Fund plc (LSE: GIF), today issues its Q3 2018
Investment Report for the period 1(st) July 2018 to 30(th)
September 2018, a pdf copy of which can be obtained from GIF's
website at: www.gulfinvestmentfundplc.com.
GIF seeks exposure to emerging investment opportunities and
positive fundamental factors in the Gulf Cooperation Council
("GCC") region that have not yet been priced in by the market. The
Company invests in quoted equities in the region as well as
companies soon to be listed. The Investment Adviser invests using a
top-down approach monitoring macro trends and identifying promising
sectors and companies in GCC countries.
The Gulf Cooperation Council comprises: Bahrain, Kuwait, Oman,
Qatar, Saudi Arabia and the United Arab Emirates.
GIF Quarterly Report
3 months ended 30 September 2018
Highlights
Ø Net asset value (NAV) +1.0 per cent; S&P GCC Composite
index (S&P GCC) -0.2 per cent
Ø Since investment policy changed in December 2017 Gulf
Investment Fund (GIF) +22.9 per cent vs. S&P GCC +12.8 per
cent
Ø Saudi Arabia and UAE GDP set to accelerate in 2018 and
2019
Ø Oil price at four-year high above US$80
Ø Kuwait now included in FTSE Emerging Markets, expected to
attract US$1 billion inflows
Performance
GIF monitors its performance against the S&P GCC index and
continues to outperform this index.
NAV rose 1.0 per cent in the quarter. For the first nine months
of 2018, NAV is up 13.4 per cent ahead of the S&P GCC index
which is up 9.6 per cent. Since the investment policy widened from
Qatar-focused to Gulf Cooperation Council (GCC) focused in December
last year, NAV is 22.9 per cent higher and the S&P GCC 12.8 per
cent higher.
On 30 September 2018, the GIF share price was trading at a 15.3
per cent discount to NAV.
GGC Markets
In the quarter, Qatar market (up 8.7 per cent) performed best
with the UAE's Abu Dhabi market close behind (up 8.2 per cent).
Qatar continued to benefit from international institutional buying
after changes to foreign ownership limits. Stronger investor
sentiment boosted by a government-led stimulus package and healthy
quarterly results for listed companies took Abu Dhabi's ADX index
to multi-year highs. Saudi Arabia lagged its peers (down 3.8 per
cent) after investors booked profits after an extended positive
run.
The S&P GCC has bucked the general emerging market trend in
2018, being up 9.6 per cent while the MSCI Emerging Markets index
is down 9.5 per cent.
Portfolio Structure
Country Allocation
GIF's weightings in different GCC markets depends on their
investment outlooks and valuations. GIF is still overweight Qatar
(34.1 per cent of NAV), because of Qatar's attractive valuation
compared to other GCC markets. GIF's weighting to Saudi, Kuwaiti
and the UAE companies were 39.0 per cent, 9.5 per cent and 9.6 per
cent of NAV, respectively. Cash increased to 7.7 per cent as at 30
September (30 June: 4.5 per cent).
Please refer to the IMS on the Company's website
https://www.gulfinvestmentfundplc.com/publications/quarterly-reports/
for a Chart: Country Allocation.
As at 30 September GIF has 38 holdings: 16 in Saudi Arabia, 13
in Qatar, 4 in the UAE and 5 in Kuwait (vs. 43 holdings in 2Q18: 24
in Saudi Arabia, 9 in Qatar, 5 in the UAE and 5 in Kuwait).
Portfolio
Top 5 Holdings
Company Name Country Sector % share of NAV
Qatar Gas Transport Qatar Energy 9.2%
-------------- ------------ ---------------
Commercial Bank of Qatar Qatar Financials 8.0%
-------------- ------------ ---------------
Al Rajhi Saudi Arabia Financials 6.0%
-------------- ------------ ---------------
National Commercial bank Saudi Arabia Financials 5.3%
-------------- ------------ ---------------
National Bank of Kuwait Kuwait Financials 4.7%
-------------- ------------ ---------------
Source: QIC
The stake in Qatar Gas Transport Company was increased further
(9.2 per cent of NAV vs. 8.4 per cent in 2Q18) as its valuation is
attractive. The company is set to benefit from increased transport
demand from Qatar's 'North Field' gas field expansion. Holdings
were increased in National Commercial Bank, Al Rajhi Bank and
National Bank of Kuwait as these should benefit from rising
interest rates and rising credit demand.
Sector Allocation
Please refer to the IMS on the Company's website
https://www.gulfinvestmentfundplc.com/publications/quarterly-reports/
for a Chart: Sector Allocation.
The Investment Adviser slightly increased holdings in the
Financials sector to 47.6 per cent from 46.4 per cent in 2Q18. GCC
banks have strong balance sheets & government backing and
should benefit from resurgent infrastructure spending. Recent
interest rate hikes should allow them to gradually reprice their
loan books.
The Investment Adviser also continued to increase exposure to
the Energy and Materials sectors, now at 14.6 per cent and 13.2 per
cent, up from 14.0 per cent and 8.7 per cent in June, respectively.
The oil price recovery should spur growth in the Energy and
Materials industry while tighter demand should help pricing.
Holdings in the Utilities and Real Estate sectors were reduced,
while Healthcare holdings were sold completely as valuations looked
stretched.
Oil Prices Fuels Optimism
Rising oil prices have greatly improved the outlook for budget
and trade balances in the GCC and prompted optimism about
growth.
The oil price is reflecting worries over supply tightening as
sanctions are set to be imposed on Iran by the US from
November.
Considering the lower estimated breakeven oil prices for FY18
budgets, the current high oil price is expected to push some GCC
countries to a budget surplus.
The IMF expects GCC economies to see a pick-up in GDP growth in
2018 and 2019, having bottomed out in 2017, supported by oil prices
and recovering non-oil business activities.
Better government finances arising from lower subsidies and
imposition of VAT in Saudi Arabia and the UAE earlier in 2018 is
also adding to positive sentiment in the region.
Please refer to the IMS on the Company's website
https://www.gulfinvestmentfundplc.com/publications/quarterly-reports/
for a Chart: GCC Fiscal Breakeven (2018f)
When the oil prices were low the GCC's petrochemical industry
lost competitiveness. GCC governments responded by developing
large-scale integrated plants to diversify their product offering.
With higher oil prices, petrochemical costs should rise, driving
higher product prices globally. The combination of better pricing
and more efficient, larger plants and a wider product range should
help the GCC regain its competitive edge in petrochemicals. This in
turn will generate additional export revenues, boosting non-oil
growth and creating employment.
Following the rate hike by the US Fed in September, most GCC
central banks raised their key interest rates. Rising interest
rates may impact credit growth in the short term but should add to
the overall profitability of banks.
For 2018, the IMF expects GDP growth for the UAE to be 2.9 per
cent (up from 2.0 per cent), with Saudi Arabia at 1.9 per cent (up
from 1.7 per cent), Bahrain at 3.0 per cent, Kuwait at 1.3 per
cent, Qatar at 2.6 per cent and Oman at 2.1 per cent.
Please refer to the IMS on the Company's website
https://www.gulfinvestmentfundplc.com/publications/quarterly-reports/
for a Chart: Fiscal Balances to Improve in 2018f & 2019f
The IMF is also forecasting Saudi Arabia's non-oil growth to
strengthen to 2.3 per cent this year. Saudi's growth is expected to
pick-up further over the medium-term as reforms take effect and oil
output rises. The fiscal deficit is expected to continue to narrow,
from 4.6 per cent of GDP this year to 1.7 per cent of GDP in
2019.
Saudi has introduced a new bankruptcy law to help improve the
business environment. And also released a draft law that increases
the possibility of private and public sector collaboration in
executing projects. This could mean sizeable international inflows
for public-private projects in the construction and real estate
sectors.
Saudi authorities continued their focus on job localisation and
tightened "Nitaqat" requirements for certain sectors. The
Investment Adviser is of the view that reforms should focus on
levelling the playing field between Saudis and expatriate workers
in areas where Saudis are likely to work, and they will involve a
difficult adjustment for some companies and may depress growth in
the short-term even if the employment of nationals increases.
The delayed Saudi Aramco IPO is now expected in early 2021.
UAE tourism is expected to get a further boost after the
authorities approved exempting UAE transit passengers from all
entry fees (for the first 48hrs of their stay) and VAT refunds for
tourists. Tourism contributes heavily to UAE's economy. Last year
nearly 16 million people visited Dubai, while a further 123 million
passengers travelled through the country's airports.
To promote longer-term growth, the UAE announced that it will
allow expatriates to seek extended residency visas after
retirement. Foreigners aged 55 or above with sufficient financial
resources will be allowed to apply for a 5-year retirement
visa.
In the UAE Banking sector, Abu Dhabi Commercial Bank, Union
National Bank and Al Hilal Bank are in talks about merging. This
would help the consolidation of the overbanked UAE banking sector
and will increase banks' pricing power, reduce pressure on their
funding costs and increase their ability to meet sizeable
investments.
Abu Dhabi's government also revealed further details of its
3-year AED50 billion (US$14bn) stimulus plan targeting: business
and investment; society; knowledge and innovation; and lifestyle.
This should help to reduce the cost of doing business, improve
competitiveness and boost foreign investment.
The UAE's overall growth is expected to strengthen to 2.9 per
cent this year and 3.7 per cent next year.
During the quarter, Moody's changed its outlook on Qatar to
'Stable', affirming the nation's resilience to the economic,
financial and diplomatic boycott by its three neighbouring GCC
countries and Egypt, for an extended period of time, without a
material deterioration of the sovereign's credit profile. Qatar's
economic fundamentals remained sound as illustrated by its high
ratings across all three major ratings agencies - Fitch, Moody's
and S&P ("AA-", "Aa3" and "AA-", respectively).
Kuwait deepened its ties with China, synergizing the 'Belt and
Road' Initiative with Kuwait Vision 2035. The nation will work to
promote the establishment of a China-GCC free trade area. Moreover,
several bilateral agreements covering e-commerce, FDI, oil, and
smart cities were signed in the process. This could further boost
infrastructural investments in the country.
Kuwait joined the FTSE Emerging Markets Index in September and
is expected to attract US$1 billion of passive inflows to its
capital markets, boosting liquidity and placing the country firmly
on the map for foreign investors.
GCC Outlook
The Investment Adviser believes higher oil production and
recovering oil prices should give impetus to governments' spending
plans and boost economic activity. This should improve the budget
deficits that GCC nations ran up in order to boost non-oil
activities. However, GCC governments need to guard against reducing
their reform momentum as sustainable long-term growth is primarily
dependent on these diversification efforts.
The profitability of GCC banks should increase with widening
deposit/loan margins, whereas stronger oil prices, higher
government spending and non-oil growth should stimulate credit and
deposit growth in the medium term. It is likely that GCC companies
could outperform their global peers if they can successfully
navigate the near-term impacts of government reforms.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDXLLFLVBFXFBZ
(END) Dow Jones Newswires
October 23, 2018 02:00 ET (06:00 GMT)
Gulf Investment (LSE:GIF)
Historical Stock Chart
From Jul 2024 to Aug 2024
Gulf Investment (LSE:GIF)
Historical Stock Chart
From Aug 2023 to Aug 2024