9 April 2024
Legal Entity Identifier:
2138009DIENFWKC3PW84
31st March
2024
Gulf Investment Fund plc
(GIF) quarterly report: 3 months to
31st March 2024
§ Net Asset Value (NAV) +4.4
per cent (GIF's benchmark, S&P GCC Index +2.3 per cent)
§ 2024 outlook supported by
firmer oil price, expansionary fiscal policies, continuing
institutional reforms and comparatively low inflation, tempered by
wider geopolitical risks.
Performance
GIF NAV rose 4.4 per cent for the quarter,
outperforming the benchmark S&P GCC Index which was up 2.3 per
cent.
Positive performance came from Saudi Ground Services
(up 43.3 per cent), Arabian Centres Limited (up 19.8 per cent) and
Arab National Bank (up 15.4 per cent). Negative performance came
from Commercial Bank of Qatar (down 22.2%), and Qatar National Bank
(down 13.9 per cent).
On 31st March 2024, the GIF share price
was trading at a 0.6 per cent discount to NAV (five-year average
discount 6.2 per cent).
Portfolio changes
GIF increased exposure to materials and real estate
sectors as valuations look undemanding given their growth
prospects.
Weighting of the fund in the materials sector doubled
to 11.0 per cent of NAV from 5.5 per cent in 1Q, with new holdings
in Yanbu Cement and Saudi Cement. Both have proximity to major
projects in KSA, good market shares, and available plant
capacity.
Exposure to real estate rose to 5.4 per cent from 2.1
per cent, mainly due to a new holding in Arabian Centers Company, a
leading mall operator in Saudi Arabia.
The fund's allocation to the financial sector was
reduced to 44.4 per cent from 46.3 per cent. New holdings were
added in Malath Cooperative Insurance Company and The Mediterranean
& Gulf Insurance & Reinsurance Company.
Exposure to healthcare reduced from 6.2 per cent to
2.2 per cent given its relatively full valuation. The fund divested
from the communications sector (2.2 per cent of NAV, as of December
2023), as the money can be better deployed elsewhere.
In country terms GIF remains overweight Qatar (21.3
per cent vs. an index weighting of 9.1 per cent) and Oman (2.1 per
cent vs 1.0 per cent) GIF is underweight UAE (8.7 per cent vs 16.9
per cent) and Kuwait (5.0 per cent vs 9.9 per cent).
Exposure to Saudi Arabia is in line (61.0 per cent vs
benchmark weight of 62.4 per cent).
Qatar remains an overweight due to its macroeconomic
resilience and Qatari companies' defensive characteristics make the
country attractive. GIF is overweight Oman because the
outlook for Oman is now positive.
1.9 per cent of the fund was in cash on
31st March 2024.
GIF ended the quarter with 30 holdings: 20 in Saudi
Arabia, 6 in Qatar, 2 in the UAE, 1 in Kuwait and 1 in Oman.
Outlook
The long-term positive factors for the GCC remain the
ongoing reforms, tourism growth and expansion of the non-oil
economy. Shorter term moderating inflation and central banks
gradual easing of monetary policy will provide further support.
Inflation in the GCC has largely normalized.
The IMF expects GCC economies GDP to grow 3.7% in
2024 in real terms, with Saudi Arabia and Qatar to grow 4.0% and
2.2%, in real terms respectively.
The purchasing managers index (PMI) is still firmly
positive across the Gulf, led by Saudi Arabia. All the underlying
readings were strong, including output and new orders, which
increased from an already high base.
New project awards in the GCC reached new levels in
2023, valued at over $200 bn in total, led by Saudi and UAE.
Looking back, project awards previously peaked in 2014 when oil was
trading close to $100 per barrel. Given the spending on KSA
projects we expect contract awards to maintain an upward trend over
the coming years.
Saudi Arabia welcomed 100 million tourists in 2023.
It has now upped its 2030 tourism target to 150 million.
GCC Countries are increasingly investing in clean
energy to reduce reliance on fossil fuels and create opportunities
for exporting renewable energy. Outside energy, sizeable
investments are being made in transportation, social
infrastructure, and digitalization.
Despite the generally positive outlook, risks such as
regional conflicts and pressure on Red Sea shipping traffic pose
short term threats to the GCC's economic stability.
GIF
Country Allocation as of 31st March
2024
|
|
Top
5 Holdings
|
|
|
Company
|
Country
|
Sector
|
% NAV
|
|
Saudi National Bank
|
Saudi Arabia
|
Financials
|
7.8%
|
|
Dubai Islamic Bank
|
UAE
|
Financials
|
5.5%
|
|
Integrated Holding Co.
|
Kuwait
|
Industrials
|
5.0%
|
|
Saudi British Bank
|
Saudi Arabia
|
Financials
|
5.0%
|
|
Qatar Navigation
|
Qatar
|
Financials
|
4.9%
|
Source: QIC; as of 31st
March 2024.
|