FMG (EU) MENA Fund gained 4.1% in the 2nd Quarter of 2017
Despite the price of Brent being in deep negative territory in 2017, the MENA markets have proven resilient. In fact, our technical models still confirm a bullish trend. The only sizeable stock market in the region that has performed worse than Brent in 2017 is Oman, a market we almost have no exposure to. Saudi shrugged off the 10% decline in oil prices as MSCI announced that it would be added to the Emerging Market watch list. This is a big step for a region that has been “off the radar” for most investors.
All over the news we could read about major GCC powers severing diplomatic ties and enforcing an economic blockade on Qatar. There are many strong wills involved and mediation by Kuwait and others have so far not borne fruit. The Qatari have a huge war chest to withstand an economic blockade, but business will slow down and the stock market has underperformed sharply since the announcement on 5th June. This is not the first time that Qatar is at loggerheads with its neighbours and we do expect to see a solution within the coming months, as in the past.
We finish with some positive vibes from one of our underlying managers: “We are paying 10.5x 2017 earnings and 8.2x 2018 estimates. That implies growth of more than 20% and a PE/G ratio of 0.3. We can’t remember ever having a lower PE/G ratio. Maybe this is another reason why we are in a good mood.”