The peripheral markets of Tunisia (+30%) and Jordan (+11%) were the best performings in the region in a quarter where MENA markets substantially outperformed world markets. This had little impact on the MENA fund’s performance as these markets are relatively small and account for around 4% of the fund’s exposure. However, the heavyweight Saudi market rallied by 9% adding significantly to this quarter’s performance as more than 1/3 of the fund’s assets are invested in this market.

Ever since Mohammed Bin Salman was appointed crown prince of Saudi Arabia, the country has been on a path of reform on all levels which we believe will lead to higher growth rates for a foreseeable future. As just one example, the Saudi stock exchange – the Tadawul – has continued to develop and it is expected to be included in the MSCI EM index, which will be a huge step not only for Saudi Arabia but for the whole region as it will become “investable” and more mainstream. We have already seen signs of a pick up in foreign activity with net foreign inflows to MENA hitting US $1.2 bn in March, up from US $ 0.4 bn in February, and Saudi was by far the most popular investment destination in the region. If you want to have a closer look on the ground, Saudi will for the first time ever grant tourist visas from April 1st…

Valuation-wise the region is still looking quite attractive with PE multiple of the Saudi stock market relative to the MSCI World below the historical average. So when the anticipated MSCI EM inclusion is confirmed, the estimated inflows of US $40 bn will likely push the index significantly higher.

Domicile: Malta, Sources: Bloomberg