Abu Dhabi, United Arab Emirates --- May 5, 2010 --- The Abu Dhabi Securities Exchange on Wednesday, May 5, 2010. ( Delores Johnson / The National )
Abu Dhabi, United Arab Emirates --- May 5, 2010 --- The Abu Dhabi Securities Exchange on Wednesday, May 5, 2010. ( Delores Johnson / The National )

Regional unrest creates opportunities for Gulf investors



Regional political unrest that has sent investors scurrying from Gulf stock markets has also thrown up buying opportunities, according to a top official at Invest AD.

Sachin Mohindra, the head of GCC portfolio management at Invest AD, which is owned by the Abu Dhabi Government, said the recently launched GCC Focus fund would be "gradually deploying capital at the right valuation points" to take advantage of declines in prices caused by the unrest as well as by earthquakes in Japan and New Zealand this year.

"[Stocks] have been more negatively affected by this news flow than other asset classes," Mr Mohindra said. "In local markets, the effect has been significantly more than global markets … But in our opinion, the base case for equities is pretty much still intact, whether it is for global equities or regional equities."

Investors across the region have been selling since January, when the Arab world's "spring of revolution" began in Tunisia. The instability has pushed the S&P GCC Composite price index, a major Gulf stock index, down by about 3 per cent since the beginning of the year.

The GCC Focus fund lost about 3.5 per cent in the year to the end of March, Mr Mohindra said, after beating most of its peers last year with a 19.5 per cent return.

The recent declines, however, mask the long-term potential of the Gulf's leading companies, according to Mr Mohindra, who manages just over US$23 million (Dh84.4m) in the GCC Focus fund and runs a similar regional investment strategy for private clients and institutions alongside it.

And given fiscal stimulus measures announced recently in the Gulf - including $36 billion of spending on housing, infrastructure and social programmes announced last month in Saudi Arabia - he said the case for investing in regional companies that could reap the benefits has only grown stronger.

"Yes, it will stoke a little bit of inflation, but it will definitely result in high consumption," he said. "People would spend that money on something, and that will drive consumption demand in Saudi. [We are looking at] stocks that benefit from rising consumption demand, whether it is consumer staples, consumer durables, even telecoms and banks, because there is under-penetration of retail banking services across the region."

Other themes Mr Mohindra is exploring include investing in Gulf petrochemical companies, which have an advantage over Asian, European and North American competitors through lower energy and feedstock costs. He is also bullish about companies that will profit from a regional drive to create and modernise existing infrastructure and about holding companies that benefit from the region's abundance of capital.

The chief challenge this year, he said, lay in evaluating the amount of risk in the Gulf's financial system and the possibility that profits in future years will not be as strong as expected. Invest AD is already incorporating a greater degree of risk into its analysis after recent regional unrest and general global instability. But Mr Mohindra said even after taking more risk into account, buying opportunities were still plentiful.

"What's happening in Libya has a very limited direct impact on GCC-listed companies, but indirectly yes, it has an impact everywhere in the world," Mr Mohindra said.

"That's why we do sensitivity analysis and stress-testing earnings. You use multiple scenarios and do multiple stress tests, and … where I still see value I will buy those companies. And there are enough of those."

David Sanders, the chief investment officer of Invest AD's asset management arm, said last month that the firm was also buying Egyptian stocks that were cheaper after the revolution there.

Tank warfare

Lt Gen Erik Petersen, deputy chief of programs, US Army, has argued it took a “three decade holiday” on modernising tanks. 

“There clearly remains a significant armoured heavy ground manoeuvre threat in this world and maintaining a world class armoured force is absolutely vital,” the general said in London last week.

“We are developing next generation capabilities to compete with and deter adversaries to prevent opportunism or miscalculation, and, if necessary, defeat any foe decisively.”

THE BIO

Born: Mukalla, Yemen, 1979

Education: UAE University, Al Ain

Family: Married with two daughters: Asayel, 7, and Sara, 6

Favourite piece of music: Horse Dance by Naseer Shamma

Favourite book: Science and geology

Favourite place to travel to: Washington DC

Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.

Director: Laxman Utekar

Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna

Rating: 1/5

Roll of honour

Who has won what so far in the West Asia Premiership season?

Western Clubs Champions League - Winners: Abu Dhabi Harlequins; Runners up: Bahrain

Dubai Rugby Sevens - Winners: Dubai Exiles; Runners up: Jebel Ali Dragons

West Asia Premiership - Winners: Jebel Ali Dragons; Runners up: Abu Dhabi Harlequins

UAE Premiership Cup - Winners: Abu Dhabi Harlequins; Runners up: Dubai Exiles

West Asia Cup - Winners: Bahrain; Runners up: Dubai Exiles

West Asia Trophy - Winners: Dubai Hurricanes; Runners up: DSC Eagles

Final West Asia Premiership standings - 1. Jebel Ali Dragons; 2. Abu Dhabi Harlequins; 3. Bahrain; 4. Dubai Exiles; 5. Dubai Hurricanes; 6. DSC Eagles; 7. Abu Dhabi Saracens

Fixture (UAE Premiership final) - Friday, April 13, Al Ain – Dubai Exiles v Abu Dhabi Harlequins

The rules of the road keeping cyclists safe

Cyclists must wear a helmet, arm and knee pads

Have a white front-light and a back red-light on their bike

They must place a number plate with reflective light to the back of the bike to alert road-users

Avoid carrying weights that could cause the bike to lose balance

They must cycle on designated lanes and areas and ride safe on pavements to avoid bumping into pedestrians