Tuesday, January 22, 2008

CIMB: Time to invest in the Middle East, North Africa

TheEdge

KUALA LUMPUR: The Middle East and North Africa (MENA) region, long overlooked by foreign investors, is ripe for the picking, according to CIMB-Principal Asset Management Bhd and Societe Generale Asset Management (SocGen).

Having benefited from the oil boom, countries in the region, including the United Arab Emirates, Oman, Bahrain, Egypt and Jordan, are now trying to convince investors there is more to the destination than just oil, spending their wealth in sectors such as infrastructure, tourism and on the creation of financial centres.

“The MENA region is attractive for investors due to its strong economic backdrop, uncorrelated markets and attractive valuations due to strong corporate earnings from high oil prices,” SocGen emerging market equities fund manager Mark Krombas said.

MENA economies grew more than 5% in each of the past three years, with Qatar’s gross domestic product (GDP) rising the fastest and emerging as a country with one of the highest GDP per capita in the world, he said.

Krombas added that SocGen’s Arab Fund saw a 60% rate of return last year, against 17.8% in 2006, and due to the region’s low correlation to the rest of the world’s markets, the region was not expected to be heavily impacted by global volatility.

On the region’s other growth sectors, he said the Gulf Cooperation Countries (GCC) had allocated an estimated US$1.5 trillion (RM4.95 trillion) for domestic infrastructure programmes over the next five years, while GDP contributions from the agriculture, construction, manufacturing and services sectors were expected to rise between 7% and 8% in Qatar, Bahrain and Saudi Arabia last year.

There was also a strong demand for consumer and financial products and the region’s young population was expected to drive demand for the real estate sector, he said.

He added while investors perceived the region as a high-risk destination due to geo-political issues, risk levels were relatively low in reality.

He said the Economist Intelligence Unit had assigned an “A” rating for Oman, Kuwait, Bahrain and the UAE, “BBB” for Qatar and Saudi Arabia, “BB” for Tunisia, Egypt and Algeria and “B” for Jordan under its country risk ratings, where Malaysia, India were assigned “BBB” and China “B”.

Speaking at a media briefing here yesterday, CIMB-Principal chief executive Datuk Noripah Kamso also said the company expected to launch an investment fund for the MENA region within the first half of this year.

“We are very interested for the Malaysian investing public to take advantage of this destination,” she said.

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