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Arab tigers burn bright

It is now possible to invest in the Middle East through a Standard & Poor’s AA-rated fund owned by Mashreqbank, domiciled in Bahrain, which is more strictly regulated than elsewhere in the Middle East.

The Makaseb Arab tigers fund has an outstanding performance since it was launched in November 2005 and is up by 22.9 per cent compared with a fall of 16.7 per cent in the MSCI Arabian index to July 1.

The Middle Eastern and North African markets are attractive because the region is rich in natural resources, especially oil, and there is increasing urbanisation together with rapid economic growth and the rise of the middle-class consumer.

The region is also a beneficiary of growth in emerging markets such as China and India and is insulated from the global economic slowdown.

The investment manager is an excellent stockpicker and ignores any benchmark. Country and sector allocations are driven purely by stock selection and it is in effect a best ideas portfolio.

The fund is currently invested around 27 per cent in Saudi Arabia, 26 per cent in the United Arab Emirates, 14 per cent in Egypt and 11 per cent in Oman, with the rest spread between Qatar, Kuwait and Jordan, with around 15 per cent in cash.

Looking at the individual sectors, there is particularly strong growth in financial services, telecoms, real estate, consumer staples and healthcare.

Stock valuations are comparable with other emerging markets.

A minimum investment of $10,000 means that even those investors with comparatively small portfolios can invest in this fund.

In today’s volatile markets, I recommend that around 5 per cent of any growth portfolio should be invested here.



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