Keep a cool head amid oil collapse, Franklin Templeton fund manager tells investors

Anxious traders at the floor of Dubai Financial Market. Many Middle Eastern stock markets have taken a turn for the worse in recent months. Reem Mohammed / The National

Amid the oil collapse-led rout in many Middle Eastern stock markets over the past couple of months, the asset manager Franklin Templeton – best known for its emerging market guru fund manager Mark Mobius – is urging investors not to panic.

“Irrespective of oil prices, this region is here to stay,” Bassel Khatoun, the head of Middle East and North Africa equities, said in Dubai. “Today we are looking at a US$2 trillion economy which is larger than India, it’s larger than Canada, it’s larger than Russia. The role and importance of this region is certainly rising in the global economy and we shouldn’t lose track of that.

“There are diverse economic drivers in the region,” he added. “To associate it with just oil is a myth.”

Even so, the UAE is the world’s eighth-biggest oil producer and the federal government funds more than 60 per cent of its budget from crude exports, while in neighbouring Saudi Arabia, the world’s largest oil exporter, the reliance is even greater.

And many investors in the region, most of whom are individual investors rather than institutions, have begged to differ from Franklin Templeton.

Stocks in the Arabian Gulf took a hammering in December as the price of crude oil plummeted more than 30 per cent, with many benchmark equity indexes including Dubai dropping just as much before making a partial recovery. As a result, Dubai’s main gauge pared its 2014 gains to 12 per cent and so far this year has added 1 per cent.

At those levels, Mr Khatoun said most equities were attractively priced because the earnings of most listed companies, especially those not directly related to hydrocarbons, would – as things stand – remain resilient. That is because many Gulf countries in recent years have made greater efforts to promote greater economic diversification through activities such as trade, tourism and financial services.

And outside the Gulf, there are many more companies in countries such as Egypt, Morocco and Tunisia that rely on revenue from activities other than selling hydrocarbons, such as tourism and agriculture.

Egypt’s benchmark stock index, the EGX30, is the best performing stock index this year, having gained 6.9 per cent.

Last year, it held the No 4 spot after recovering from three years of political and economic turmoil following the removal of former army strong man president Hosni Mubarak during a popular revolt in 2011.

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