The Fund Manager's Market Commentary as of April 24, 2012
The Arab Gateway Fund declined -0.75% in April vs. a tumble of -2.85% for the S&P Pan Arab Composite. The performance puts the AGF ahead of its benchmark by +2% for the year. Although MENA markets as a whole pulled back, the fund benefited substantially from its weights in the UAE as well as the rotations in Saudi Arabia that were made to take advantage of the earnings season.
Global markets have put in a choppy month as we expected in our recent note, with a mixed bag of macro data and the ever present concerns on European debt reigning in the previous month’s unbridled exuberance. All is certainly not rosy yet as imbalances in the global economy remain and politics and policy measures remain key market drivers. Although we remain watchful of game changing negative developments, thus far our base case of gradually improving global growth and disaster aversion in Europe near term stands firm amidst slowly improving US economic indicators, expectations of EM central banks easing as well as a thus far solid first quarter earnings season. However, as summer approaches and macro/policy indicators become more uneven, we expect markets to be more volatile.
As we pointed out last month, the surge in speculative activity in the Saudi Arabian market abated through earnings season with investor focus returning to the fundamentally sound names. The result was a market decline of over 3% through the month with the fundamentally sturdy names outperforming. The Tadawul posted an aggregate increase in earnings of 15% Year on year, a solid start to 2012 and further support to our constructive stance on Saudi Arabian equities over the medium to long term. Similarly, the rampant speculation on the UAE market has also paused through earnings season as some signs of the improving fundamentals in the Emirates come through with solidly improved blue chip earnings thus far. Qatar remains largely range-bound, however sporting solid fundamentals and a growing discount to its regional peers, ripe for a catch-up play. We remain largely constructive on MENA markets, view the improving first quarter earnings as a clear indication of their strong and improving fundamentals, look forward to near and medium term catalysts in multiple markets to keep the momentum going and barring a major global economic event, remain buyers on any substantial weakness.
The fund, although active through earnings season, sports a low cash level in line with our views. We remain OW Saudi Arabia, UAE and Qatar with an increasing weight in the latter two markets. It is also important to note that the through the resurgence of retail speculation in our markets, despite the abundance of opportunities to make a quick buck, we remain committed to our robust investment process and fundamentally strong core conviction list, both of which we are confident will continue to outperform over the medium to long term.
Accumulated Deemed Distributed Income
Arab Gateway Fund LTD has appointed PwC FS Tax GmbH Frankfurt to examine and certify the annual German Tax reporting figures including the Deemed Distribution Income (DDI), which is published in the electronic Federal Gazette as well as to WM Datenservice each year four months after the fiscal year end of respective funds at the latest.
To view the latest published Accumulated Deemed Distribution Income (ADDI) figures, please click here
Disclaimer
SHUAA Capital psc, its affiliates, and the Fund do not provide tax advice, and nothing in this section should be construed as tax advice. Before acting on any such information, consult your own accountant or tax advisor.