UAE, Egypt are the largest overweight markets in MENA

GCC issuers are on pace to issue $125bln in bonds 2021, Franklin Templeton

  
Dubai skyline. Image used for illustrative purpose.

Dubai skyline. Image used for illustrative purpose.

Getty Images

A combination of economic recovery, strong policy and attractive valuations positions the UAE as one of largest overweight market in the region from an investment perspective. 

At a virtual seminar on Monday tilted: Investing Beyond the Storm: A Global and Local View on a Post-Pandemic World, Bassel Khatoun, managing director MENA, Franklin Templeton, said policymakers in the region have proven to be very effective in managing the virus.

“A resilient economy, continuing reforms and an extensive COVID-19 vaccination programme leads us to maintain a favorable outlook on the UAE. A recovery in the residential real estate market coupled with expectations of a rebound in tourism also bodes well for equity prices,” he added.

Khatoun said the investment bank was overweight on Egypt as well, as the economy continued to grow in an environment where most economies contracted sharply.

“Its currency has also remained largely stable supported by a combination of controlled inflation and solid international reserves. Although low liquidity has been a challenge for the market, strong fundamentals and increasingly attractive valuations contribute to support our positive view.”

With the global environment being supportive of healthy equity market returns, the MENA regional index has given exceptional returns of over 20 percent already this year. The case for continued outperformance in MENA is strong, given the economic recovery, he said.  

On the fixed income side, Mohieddine Kronfol, CIO of Global Sukuk and MENA Fixed Income, at Franklin Templeton, said that GCC bonds which have more than doubled their market share relative to loans over the past five years, now command a leadership position in emerging market debt indices.

“GCC issuers are on pace to issue $125 billion in 2021, in line with last year’s total, but with sovereign issuance at 30 percent versus 50 percent in 2020 and 2019,” he added.

He said the composition of the issuances has changed with fewer sovereigns looking to plug their budgets, while more oil and gas companies are looking to monetize their assets. 

Kronfol said that despite having over $600 billion in market capitalization, GCC bonds were under-owned by international investors, who are “missing out on strong risk adjusted returns and valuations that remain generous relative to credit ratings.”

(Reporting by Brinda Darasha; editing by Seban Scaria)

brinda.darasha@refinitiv.com

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here

© ZAWYA 2021


More From GCC