Trader profile: Investors must keep strong eye on third-quarter earnings numbers
Marwan Shurrab, director-fund manager and head of Trading at Vision Investments and Holdings. He is based in Dubai and has nine years of experience in the management of equity funds.
What is the asset class and geography you are focused on?
I work as a fund manager, focusing on regional equity markets with international exposure primarily for hedging purposes.
What is the outlook for the month ahead?
Taking the bigger picture into consideration, we would have to acknowledge the eventful year we have had. The latest of these events was the June sell-off in the market followed by the summer turnover slowdown. This has affected sentiment and risk appetite aggressively. Despite that, the market was able in mid-July to take advantage of the slowdown by consolidating and building a support base. Currently we have almost rebounded to the June highs on an index level, mainly supported by blue chips in the banking and real estate sectors. Going forward we should expect a continuation to the strong year to date performance, mainly supported by the strength of the second-quarter numbers for most companies. Investors should maintain their selective approach with focus on companies that are showing strong earning growth potential for 2014. Sectors such as banking and real estate should continue their outperformance as long as their earnings continue to support.
What are the main risks (upside or downside) to that outlook?
One of the main risks going forward will be earnings disappointments due to the high market expectations. Overstretched valuations is another concern which could affect market performance. Investors will have to keep a strong eye on the third-quarter numbers to justify current multiples and find bargain investment opportunities.
What was the best investment you were involved with?
Despite all the drama that Arabtec shares caused lately, I would have to say that it was our best investment for 2014. We fully positioned into Arabtec shares back at the end of October 2013, with the conviction in its growth capabilities. At the time we bought the stock around Dh2.5 – before the capital increase adjustment. We exited around the Dh6 level after the capital increase as the market started to sell off in June.
What was the worst?
Overconfidence in the strength of the market in June, excluding Arabtec, was one of the mistakes we fell in this year. Despite the fact that blue chips were able to rebound to the same levels latterly, believing that the Arabtec sell-off will have limited effect on the rest of the market turned out to be a costly mistake. Thankfully blue chips were able to rebound in a short period, mainly due to the fact that earning growth and recovery is still a main theme for 2014.
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Published: August 31, 2014 04:00 AM