In the 4th quarter oil prices rallied by around 20% but almost all stock markets in the oil exporting nations around the world failed to track this performance. On the contrary, in the MENA region, the oil importers were the best performers with Jordan gaining 6% followed by Tunisia at around 3%.

2018 was a year of good performance relatively speaking, as the fund managed to substantially outperform the index and also with lower volatility. The fund´s overweight positions in some of the peripheral markets such as Morocco and Egypt added alpha, while largely avoiding exposure to the underperforming sectors and markets such as Qatar. But relative to peers it was a poor year for the MENA region, with GDP growth far below its historical average. The valuation discount to EMs could persist as tensions are still high within MENA. However, Brent continued to recover as both OPEC and non-OPEC members cut production and, with GCC governments’ spending in better order, the region is looking economically sound. In the year ahead we will be closely watching the developments in the energy market. Foreign flows will also be crucial and the positioning of investors prior to inclusions by FTSE and MSCI, most notably in Saudi where the inflow of around $10bn is expected from just the passive index flows. Egypt also looks like an interesting market where accelerated growth and falling interest rates could set the market higher.

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