The Fund Manager's Market Commentary as of April 24, 2012
The Saudi Gateway Fund declined -2.42% in April vs. a fall of -3.63% for the S&P Saudi Arabia Index. The Saudi market declined through the month on profit booking ahead of earnings season which generally gives retail investors cause for pause. The Tadawul however remains up around +15% YTD, one of the best performing markets of the world.
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.
Two key developments in Saudi bear mentioning this month. Firstly, in line with our expectations stated 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 resulting outperformance of these solid names - evident in the fund’s performance - goes to show how strong the retail/speculative activity on the Tadawul had become. Although we do not expect the speculation to end completely, the very public efforts being made by the King to arrest it coupled with the opening up of the Saudi market to foreigners should check it a little near term. Secondly, also as we highlighted last month, first quarter earnings have been largely solid with the Tadawul posting an aggregate increase in earnings of 15% Year on year. This is a solid start to 2012 and further support to our constructive stance on Saudi Arabian equities over the medium to long term.
We note that despite the short term volatility and the abundance of short term opportunities to make a quick buck the fund remains committed to our fundamentally sound and solid core conviction list. Through the month we remained OW petrochemicals, EW banks and booked gains in retail rotating to Food and Beverage ahead of summer. Our cash level also stayed rather low in line with our bullish views on the Saudi market.
Accumulated Deemed Distributed Income
Saudi 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.