Invest AD, an Abu Dhabi-based asset manager, increased stakes in Saudi Arabian stocks during recent price swings on expectation consumer-related businesses are set to benefit from a young and increasingly wealthy population.
“We used the volatility to buy,” Sachin Mohindra, who manages Invest AD’s $27 million GCC Focus Fund, said in an interview in Abu Dhabi yesterday, referring to recent price swings caused by concern over the king’s health. “We look at valuation closely. Unless there is a fundamental deterioration in the company and the stock has come down, we would buy.”
Saudi Arabian equities make up about 63 percent of its GCC Focus Fund, Mohindra said. About 70 percent of the country’s population is under 30 and per capita income is rising amid economic growth spurred by $500 billion of investment plans, buoying demand for consumer goods from food to televisions. United Electronics, an electronics retailer, and food company Savola Group will benefit from increased consumption and are among the fund’s top picks, he said. The GCC Focus Fund bought more shares of United Electronics Co. recently, Mohindra said.
The largest Arab economy will likely grow 5.1 percent this year, the second-fastest pace in the Gulf Cooperation Council after Qatar, according to the median forecast of 15 economists compiled by Bloomberg. The benchmark Saudi Arabian stock index fell 3.8 percent last month.
Invest AD also manages an Iraqi equities fund and its manager Sherif Salem said he expects interest in stocks in that country to increase once international custodians are licensed. Currently, custody of shares is managed by a division within the stock exchange, he said.
“We’ve had a number of interested investors that would invest in our fund right there and then but they’ve been held back because of this custody issue,” Salem said in an interview in Abu Dhabi yesterday.
The initial public offering of Asiacell, the Iraqi telecom operator majority owned by Qatar Telecom QSC, will also attract interest from foreign investors when it starts trading next year, he said. Two thirds of Invest AD’s $18 million Iraq Opportunity Fund is made up of banks, according to its October fact sheet. At the end of October, the fund’s value had decreased 7.4 percent year-to-date.
“The banking sector is the one that is operating closest to normal,” Salem said. “They are able to lend, take deposits but they are doing little finance. The potential is there.”