The GCC equity funds on an asset weighted average returned a negative 3 percent compared to a rollicking 10 percent in December 2007, while MSCI GCC declined by 9 percent, Kuwait Financial Center said in a recent report. It said after a spectacular December, January 2008 turned volatile and provided the least returns in the last 12 months. Markaz, the Kuwait Financial Centre research department, said that after rallying 10 percent in December, the returns of GCC equity funds succumbed to the worst market performance in 12 months, posting a negative 3 percent return for January. The Saudi market plunged 13.4 percent, while Qatar and the UAE dipped 1 percent and 1.7 percent respectively, dragging the MSCI GCC Index, which tracks the performance of GCC markets, down 8.6 percent. Saudi Arabia, Qatar and the UAE comprise 75 percent of the total market capitalization of the GCC. Kuwait, Oman and Bahrain bucked the trend, posting gains of 7.5 percent, 1.5 percent and 1.6 percent respectively, but due to the relatively slight weighting of the latter two markets, were unable to lend significant support to the overall regional performance. Markaz said. The aggregate allocation to Saudi Arabia declined by 5 percent during January 2008 to 30 percent. Funds such as Khaleej Equity Fund, SIB GCC Equity Fund and AlBasha'er GCC Equity Fund considerably decreased their exposure to the Saudi market. Khaleej Equity Fund decreased its allocation by 11 percent, SIB GCC Equity Fund and AlBasha'er GCC Equity Fund reduced allocation by 8 percent. Bahrain also witnessed a 100 Bps decrease in fund allocation. The decline in fund allocation to the Saudi Arabia and Bahrain was compensated by increased allocation to Kuwait (up 2 percent), the UAE (2 percent) and Qatar (1 percent). The 26 percent fund allocation to the UAE was the highest since April 2007. AlBasha'er GCC Equity Fund increased its exposure to the UAE market by 7 percent. Allocation to Oman and other MENA markets remained unchanged from December 2007 levels. The decline in January seems to have also instilled some amount of caution among money managers. Mutual funds have reduced their exposure to equities as an asset class and have increased their allocation to cash and bonds. Mutual funds decreased their equity allocation to approximately 90 percent in January from 93 percent in December 2007. This represented the lowest equity allocation since July 2007. Furthermore, on average, the cash held by GCC funds increased by 3 percent to 9 percent. Only 4 of the 24 funds tracked by Markaz posted positive returns during January 2008. The extent of decline during the month has been less intense on the Shariah- compliant funds. The benchmark for Shariah-compliant funds posted a positive return of 1.7 percent in January 2008 as compared to a negative return of 8.5 percent on MSCI GCC Index. Among conventional funds, Al-Ahli Gulf Fund, which had an equity allocation of 66 percent in the Kuwaiti market, was the best performer with returns of 3.1 percent. Khaleej Equity Fund, among the top five performers in December 2007, continued with the trend, yielding monthly returns of 2.7 percent. Furthermore, Khaleej Equity Fund increased its exposure to equities by 6 percentage points in January 2008. Vision Emerging Fund, which provided the highest returns in December 2007, was in the third position with a monthly loss of 0.7 percent. In January 2008, Riyad Gulf Fund was the best performing Shariah-compliant fund with returns of 0.3 percent. However, it should be noted that the fund does not invest in Saudi Arabia. The performance of the benchmark index was better than all Shariah-compliant funds as it recorded positive returns of 1.7 percent. Al- Dana GCC Equity Fund posted a loss of -1.8 percent in January after returning 9.8 percent in December. AlBasha'er GCC Equity Fund was the third-best Shariah-compliant fund. Al-Tawfeek Gulf Equity Fund and Gulf industrial companies fund posted a loss of 4.5 percent and 5.1 percent respectively. __
