10 July 2024
Legal Entity Identifier:
2138009DIENFWKC3PW84
Gulf Investment Fund plc
(GIF) report: 3 months to 30th June
2024
§ Net asset value (NAV) down
3.6 per cent (GIF's benchmark, S&P GCC Index down 3.9 per
cent)
§ GCC's 2024 economic outlook
good with oil sector recovery, government spending and ongoing
reforms amid global challenges.
Performance
GIF NAV was down 3.6 per cent for the quarter,
although this outperformed the benchmark S&P GCC Index which
was down 3.9 per cent.
Positive performance came from Qatar Navigation (up
8.9 per cent), The Mediterranean and Gulf Insurance Reinsurance
Group (up 10.7 per cent), Qatar National Bank (up 3.0 per cent) and
Qatar Gas Transport (up 16.9 per cent). Negative performers were
Saudi National Bank (down 9.8 per cent and Commercial Bank of Qatar
(down 10.9 per cent).
On 30th June 2024, the GIF share price was
trading at an 8.0 per cent discount to NAV.
Portfolio
changes
GIF increased exposure to the Materials and
Communication Services sector as valuations look undemanding with
an attractive growth profile.
Weighting of the fund in Materials increased to 16.6
per cent of NAV in 2Q 2024 from 11.1 per cent, with new holdings in
the Saudi cement sector. These companies are well-positioned for
increase in demand given their utilization capacity potential.
The fund added a new holding in Communication
services taking its weight to 4.6 per cent of NAV, mainly from the
addition of Mobile Telecommunication Company, Kuwait. It is among
the largest mobile operators in the wider region, with operations
in 15 African countries and 7 in the Middle East. GIF's exposure to
industrials and energy rose from 23.0 per cent to 25.6 per cent and
from 0.0 per cent to 1.0 per cent, respectively.
The fund's weighting in the Consumer and Real Estate
sectors decreased from 12.0 per cent to 5.1 per cent and from 5.4
per cent to 2.6 per cent, respectively. The fund divested entirely
from the health care sector (weighting of 2.2 per cent on 31 March
2024) in pursuit of more favorable investment opportunities
elsewhere.
In country terms and relative to the benchmark, GIF
remains overweight in Qatar (23.8 per cent vs. benchmark weight of
9.4 per cent) and Oman (2.1 per cent vs 1.0 per cent). The fund
also has an overweight to Kuwait (10.4 per cent vs 9.6 per cent)
and is further underweight UAE (4.4 per cent, down from 8.4 per
cent at end of March, vs benchmark weight of 17.5 per cent) as we
reduced our UAE banking exposure. GIF's weighting in Saudi Arabia,
GCC's biggest market, is 59.2 per cent vs benchmark weight of 61.8
per cent.
Qatar remains an overweight as its macroeconomic
resilience and Qatari stocks' defensive characteristics make the
country attractive.
GIF ended the quarter with 34 holdings: 21 in Saudi
Arabia, 6 in Qatar, 3 in the UAE, 3 in Kuwait and 1 in Oman.
Outlook
The GCC region has a positive economic outlook, with
real GDP growth projected to rebound to 2.4 per cent in 2024 and
rise to 4.9 per cent in 2025. This forecast is driven by
substantial GDP increases in the UAE and Saudi Arabia, supported by
expected increase in oil production in the latter half of 2024 and
a global economic recovery. GCC growth is not solely dependent on
oil since non-oil sectors are expected to sustain robust growth in
the medium term. GCC infrastructure project awards for H1 2024 now
stand at $104.6 bn.
The IMF expects UAE and Saudi Arabia to enjoy real
Non-Oil GDP growth of 4.1 per cent and 3.9 per cent, respectively,
in 2024; and 4.2 per cent and 5.3 per cent in 2025.
GCC inflation continues to trend downwards, with the
IMF forecasting consumer price inflation to fall from 2.2 per cent
in 2024 to 2.1 per cent in 2025.
GCC visitor numbers continue to rise. In Q1 2024,
Qatar saw a 40 per cent increase in visitors over the last year,
reaching 1.6 million. Saudi Arabia's inbound visitor spending grew
by 22.9 per cent to over $12 billion during the first quarter of
the year.
The GCC continues to look attractive on the back of
increasing benefits of the socio-economic reforms being rolled out
in the region and the large infrastructure project awards.
GIF
Country Allocation as of 30th June
2024
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Company
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Country
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Sector
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Saudi National Bank
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Saudi Arabia
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Financials
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Qatar National Bank
|
Qatar
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Financials
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Qatar Navigation
|
Qatar
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Industrials
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Integrated Holding
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Kuwait
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Industrials
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Yamama Cement
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Saudi Arabia
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Materials
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