Gulf Investment Fund's Qatar allocation at 47.7% of NAV

DOHA: The London-listed Gulf Investment Fund's (GIF) net asset value (NAV) rose 6.5 percent in Q1, 2018. Since the investment policy widened from Qatar focused to GCC focused on December 7, GIF's NAV per share rose 12.0 percent and the S & P GCC rose 9.1 percent.

The new investment policy adopted in December 2017 means the GIF is now monitoring a broader universe of investment opportunities across the Gulf Cooperation Council (GCC) region comprising Qatar, Saudi Arabia, Kuwait, UAE, Oman and Bahrain as GIF. During the Q1, the GIF increased the proportion of the fund invested outside Qatar from 10 percent to 42 percent.

On the country allocation, the GIF's quarterly report noted the weighting to Qatar (47.7 percent of NAV) is still significantly above that of the S & P GCC, reflecting the Investment Adviser's view that Qatar trades at attractive valuations compared to other GCC markets. As of 31 March 2018, GIF had 42 holdings: 22 in Saudi Arabia, 12 in Qatar, 4 in the UAE and 4 in Kuwait.

Financials is GIF's largest sector at 49 percent of NAV. GCC banks have strong balance sheets and government backing and should benefit from resurgent infrastructure spending. Recent interest rate rises should allow them to gradually reprice their loan books. The Investment Adviser invested in new sectors such as petrochemicals and healthcare during the quarter. Recovery in oil prices should spur growth of the petrochemical industry while tighter demand supply dynamics should help pricing. The healthcare sector is set for growth as a result of growing populations and introduction of mandatory health insurance.

The GIF quarterly report noted that GCC nations are undergoing structural transformation, with increasing focus on economic diversification, privatisation, capital market reforms and fiscal discipline…. 'Several major listed firms in Qatar plan to raise their foreign ownership limit (FOL) to 49 percent. This should encourage foreign investment….. The recent $12bn bond sale by Qatar was heavily oversubscribed, reflecting confidence of international investors.., GIF noted.

The IMF estimates GCC 2018 GDP growth of 2.2 percent with non-oil growth easing to 2.4 percent. Over the medium-term, non-oil growth is expected to be around 3.4 percent. The GIF's Investment Adviser sees growth in the GCC economies accelerating over the coming years from stabilising oil prices and growth in the non-oil sectors. GCC markets underperformed global markets since the oil fall in 2014. This is starting to change as oil prices recovered. If GCC companies can weather near term impacts of the many government reforms that are underway, this underperformance should correct further.

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