DUBAI- Middle Eastern funds plan to increase their investments in the United Arab Emirates (UAE) and Egypt over the next three months, while largely keeping their exposure to other countries in the region at current levels, according to a Reuters poll.
Dubai was one of the world's worst performing markets last year but six out of 10 fund managers polled in March said they would increase their allocations to the UAE.
One said he was picking specific stocks rather than allocating broadly to the country, however.
The Dubai market has rebounded this year on the back of strong earnings from companies linked to Emaar Properties. Dubai's benchmark index is up 3.66 percent so far this year.
Half of the fund managers said they would increase investments in Egypt.
This month Egypt revived its privatisation programme, which has lain dormant for more than a decade, with the sale of a 4.5 percent stake in tobacco monopoly Eastern Company, which EFG Hermes advised on.
The Egyptian market is up 11.1 percent so far this year, outperforming other markets in the Middle East region.
Four of the 10 managers polled said they would increase their allocation in Saudi Arabia.
Saudi stocks joined the FTSE Emerging All Cap Index last week.
"Given international active investors are not impressed by valuations, the health of the domestic economy or the outlook for oil, we see increasing risks that foreign active buying over the year could be well below previous estimates," said Akber Khan, head of asset management at Al Rayan Investment.
"We still expect the market to gain, but those expecting a significant rally could be in for some disappointment."
Forty percent of fund managers expected to decrease their allocation to Qatar, and the same amount expected to increase their allocations to Kuwait.
Managers largely expected their overall equity and fixed income investments in the region to stay the same.
(Reporting by Nafisa Eltahir; Editing by Catherine Evans) ((Nafisa.Eltahir@thomsonreuters.com; +971 55 66 85163;))