GCC markets had a positive start to the year, after ending 2009 with a red quarter amid negative corporate news, Kuwait Financial Centre (Markaz) said in its latest report which aims to analyze the performance of equity funds across the region. Markets swung into positives for the first quarter of 2010, led by healthier corporate earnings, stronger economic outlooks and more positive corporate news. MSCI GCC gained 12 percent in 1Q10 after losing 8 percent in 4Q09. The quarter's worst performer was MSCI Bahrain, which remains in the red while the best performance came from MSCI Kuwait which gained 19 percent in 1Q10, driven by positive news from Zain which lifted most blue chips. MSCI Saudi followed with a gain of 13 percent for the quarter. GCC equity funds had an asset weighted return of 11 percent for 1Q10 as fund managers took advantage of blue chip gains as local indices were carried upwards by earnings momentum and strong economic outlooks. Asset under management (AUM) was just over $12.3 billion in 1Q10 representing an institutionalization rate (AUM/Mcap) of 1.6 percent. Both Saudi Arabia and Kuwait saw their AUM expand in the first quarter by 7 percent and 4 percent, respectively. Fund managers continue to favor Saudi Arabia, with an allocation of 43 percent. Confidence in the Kuwait market has declined, from 20 percent in June to 11 percent in March 2010; the same can be said for the UAE, where managers allocated 17 percent of their assets in September before cutting exposure to 11 percent in March. Exposure to equities increased throughout 2009 and into 2010, with a 93 percent allocation in March, while Cash exposure is down to 7 percent, based on asset weighted average, reflecting a higher risk appetite from local and foreign investors. The Tadawul index gained 11 percent in 1Q10 as positive end of year results, strong economic outlook and healthy oil prices boosted the market. Banks, agriculture and petrochemicals led the index higher, gaining 13.7 percent, 13.2 percent, and 12.7 percent, respectively, for the quarter. Consequently, AUM's expanded 7 percent to $5.08 billion. Fund managers maintained their exposure to equities at 98 percent in March 2010 versus a low of 96 percent in June 2009, while allocation to cash & equivalents increased to 2 percent from 1 percent in December 2009. The Kuwait market gained 8 percent for the quarter after two consecutive quarterly declines. Gains were led by industrials and services, 12.5 percent and 12.2 percent, respectively, on the back of positive news flow from Zain. AUM's expanded 4 percent to $3.9 billion in 1Q10. After losing 6 percent in 4Q09, Qatar's Doha Securities Market (DSM) gained 7.23 percent in 1Q10 led by banking, up 11.6 percent for the quarter after the Central Bank lifted a ban on local banks from trading on the exchange. Value traded fell 18 percent to $4.6 bn for the month. AUM's for Qatari equity funds were flat at $156 million. Dubai (DFM) underperformed the Abu Dhabi Exchange (ADX) for the quarter, gaining 2.2 percent versus a gain of 6 percent for the ADX. The DFM's gain was led by banking, up 5 percent for the quarter while insurance and financial services lost 1.9 percent and 0.4 percent. Abu Dhabi's gain was led by telecoms, up 13.6 percent. Liquidity in the UAE was down; value traded declined 39 percent from 4Q09 to $10.68 billion. AUM's for UAE equity funds continue to contract, declining 3 percent in 1Q10 to $592 million. The Muscat Securities Market (MSM) gained 5.16 percent in 1Q10 after losing 3 percent in 4Q09. AUM's for Omani equity funds dropped to $58 million as Oman Gateway Fund was retired. The Bahrain Exchange managed a gain of 6.1 percent in 1Q10, regaining the 4Q09 loss. Sectoral returns were mixed, from a high of 22 percent for Commercial Banks to a low of -6 percent for Industrials. SICO Selected Securities Fund outperformed the benchmark, MSCI Bahrain index, which lost 3.86 percent in 1Q10.
