The company believes that an improvement in market conditions since last year has created a good entry point for the fund, which is managed by HSBC subsidiary Halbis Capital Management.
Halbis senior portfolio manager Andreea Nannini and his team will identify 50 to 60 stocks in countries such as Egypt and Morocco. Nannini joined Halbis in 2007 and previously worked for BankInvest in Copenhagen as a fund manager with responsibility for Eastern Europe, Middle East and Africa.
Halbis is not concerned about short-term returns or momentum themes. It will instead focus on good companies on low valuations which have sustainable long-term growth prospects.
The teamwill draw on HSBC’s global emerging markets expertise in 18 local offices around the world. Local research is important because the Mena region is under-research by third party analysts and HSBC has the depth in resources that is needed to cover the region effectively.
According to Halbis, regulation of companies and governments in the Mena region is improving and rules concerning foreign investment are starting to be relaxed. It believes sustained growth is not restricted to countries with energy resources or to companies within the energy sector because strong domestic demand, population growth and capital investment is helping growth in other areas.
Despite a recent equity market correction, Halbis belives in the region’s potential for growth over the long term. It says equity markets reflect high levels of liquidity and positive investor sentiment from strong economic fundamentals, effective regulation and improved assessments from rating agencies. It also says valuations are also more attractive than other emerging markets.
However, the risks in the Mena region come from illiquidity, volatility due to unexpected changes in economic growth and market cycles, and differences in corporate governance standards such as auditing and accounting
The fund may be suitable for experienced investors who are looking to diversify their existing holdings in emerging markets.