Investors undeterred by unrest in MENA region

LONDON - Reuters

The political unrest in Middle East is not frightening investors drawn by opportunities in the region. AFP photo

Looking beyond the problems of a region beset by regime change in Egypt, a security crisis in Yemen and civil war in Syria, international investors are seeking out well-run businesses in Middle Eastern and even some North African stock markets.

The Middle East and North Africa (MENA) region is a diverse investment universe which includes both energy importers and exporters, and surplus and deficit economies, but enjoys cross-border trade, investment and even aid links.

Investors have focused on young populations across the region, which they believe will provide future workers and therefore opportunities for business growth. They say businesses are often able to carry on, regardless of political instability.

“Mankind is an animal of habit. After 2-1/2 years we have got used to living with unrest in certain countries such as Egypt,” said Nina de Martinis, fund manager at asset management company Amundi, adding that increased government spending and economic growth meant: “MENA is one of the future development areas of global emerging markets.”

Stocks in the Gulf economies of Abu Dhabi, Dubai and Qatar have shown some of the most spectacular performances in the world this year. That may not be a surprise, given these economies’ safe haven value in a region of conflict.

Egypt suprise

More of a surprise may be the performance of Egypt, which saw the ousting of President Mohamed Mursi last month, less than 2-1/2 years after its Arab Spring uprising.

 Egyptian stocks are up 3 percent in 2013, outperforming the MSCI emerging markets index of which they are a part; that index is down 11 percent. Some investors are nervous, particularly as stocks have fallen in dollar terms, but others focus on companies that continue to do well.

The first MENA fund opened in 1997 and after a flurry before the 2008 financial crisis, around three MENA funds a year have opened on a net basis since 2009, according to Lipper, a Thomson Reuters service.

Four net new funds have already launched in 2013. Assets under management in dedicated MENA funds rose to $1.9 billion at the end of July, from $1.1 billion in July 2012.

According to Lipper, MENA equity funds have seen net inflows during the first and second quarters of 2013, the first two straight quarters of positive flows since the beginning of 2008.

Net inflows in the first seven months of 2013 were at almost $150 million, equivalent to more than 8 percent of current assets under management.