REG - Gulf Investment Fund - Quarterly Report Q4 2022

Gulf Investment FundAnnouncement

16/01/2023 15:00

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RNS Number : 8763M  Gulf Investment Fund PLC  16 January 2023

16 January 2023

Gulf Investment Fund plc (GIF) quarterly report: 3 months to 31 December 2022

Legal Entity Identifier: 2138009DIENFWKC3PW84

§ Net Asset Value (NAV) down 3.8 per cent (S&P GCC Index down 6.1 per
cent)

§ In 2022, GIF NAV increased 8.4 per cent vs. S&P GCC Index down 4.8 per
cent - GIF outperformance of 13.1 per cent

§ 2023 outlook positive, supported by stable oil price, solid fiscal
positions and a regional economy largely shielded from recession in Europe
& US

Performance in the quarter

The benchmark S&P GCC Index fell 6.1 per cent. GIF outperformed, although
4Q 2022 was one of the worst quarters for Qatar and Saudi Arabia in past 10
years.  Qatar fell 15.9 per cent while Saudi was down 8.1 per cent. This was
in contrast to global markets: MSCI World and EM were up 9.4 per cent and 9.2
per cent respectively in the quarter.

Positive performance came from holdings in Bupa Arabia (up 6.7%), Tanmiah
Foods (up 24.2%), United International Transportation Company (up 3.7%) and
IPO gains of Americana Restaurants (up 13.4%). Negative performance came from
Saudi National Bank (down 20.0%), Qatar Gas Transport (down 10.7%) and
Commercial Bank of Qatar (down 29.0%).

On 31 December 2022, GIF share price is trading at a 5.2 per cent discount to
NAV (five-year average discount 8.7 per cent).

Changes to portfolio

During the quarter, GIF increased exposure to consumer discretionary,
industrials and communication services, as valuations were undemanding and
growth looked strong.

Consumer discretionary was increased to 15.4 per cent of NAV from 8.5 per cent
in 3Q 2022, with new holdings in Americana Restaurants and Leejam Sports
Company. The fund subscribed for Americana Restaurants' IPO and then added to
the holding. Americana benefits from low penetration in the current market,
population growth and a strong expansion plan. Leejam Sports is placed to
benefit from the growing fitness industry with a mix of premium & economy
centers, with a strong pipeline of new center openings that should strengthen
its market leading position in Saudi.

Industrial's exposure increased to 22.8 per cent of NAV from 17.5 per cent in
3Q 2022, mainly due to a new holding in United International Transportation
Company. UIT aims to  focus on the short-term rental business in expectation
of a pickup in tourism in Saudi Arabia.

The fund's exposure to financials and materials were reduced to capture better
opportunities elsewhere. Financials exposure fell from 39.3 per cent to 34.3
per cent of NAV; materials from 4.0 per cent to 0.0 per cent of NAV.

Relative to the benchmark, GIF is overweight in Qatar (22.7 per cent vs. an
index weighting of 11.2 per cent); underweight Saudi Arabia (51.8 per cent vs
benchmark weight of 58.1 per cent), UAE (10.2 per cent vs 17.5 per cent),
Kuwait (8.6 per cent vs 11.4 per cent) and Oman (0.6 per cent vs 1.1 per
cent).  6.1 per cent of the fund was in cash on 31 December 2022.

During the quarter, exposure to Saudi Arabia increased to 51.8 per cent (from
40.8 per cent) as the 8.1 per cent sell off offered an attractive entry point
on valuation grounds. Qatar remains an overweight as expansion plans and
macroeconomic resilience make the country attractive, yet it still trades at a
discount to its GCC peers.

GIF continues to have a concentrated portfolio approach. The fund ended the
quarter with 28 holdings: 16 in Saudi Arabia, 5 in Qatar, 3 in the UAE, 3 in
Kuwait and 1 in Oman.

Outlook

Following the sell-off, valuations are turning attractive, and we believe GCC
markets will recover when global market volatility settles down.

Going into 2023, the outlook for GCC remains robust, supported by
socio-economic reforms, infrastructure projects, and favorable oil demand
dynamics which furnishes the majority of GCC states with twin budget surpluses
as well as an distancing economies from recession fears prevalent in Europe
and US.

While global investors generally are underweight Qatar, Kuwait, and Saudi, the
weighting of the GCC in EM indexes is expected to increase as more IPOs are
listed, governments sell stakes, and foreign ownership limits increase.

A combination of stable oil prices, tax and expenditure reforms (like the
introduction of VAT) and continued non-oil growth will lead to an improved
positive GCC fiscal balance of 7.3 per cent of GDP for 2022, which is expected
to remain positive for the foreseeable future. GCC countries have benefited
from higher oil prices, which have converted budget deficits into surpluses
for 2022.

This also provides an opportunity for GCC countries to shift towards a green
growth strategy by investing in sustainable sectors. GDP growth for GCC is
expected to more than double vs 2021, reaching 6.5 per cent in 2022. The
inflation outlook for the GCC is relatively benign at 3.6% in 2022 and 2.6% in
2023, according to IMF's Regional Economic Outlook for October 2022.

 GIF Country Allocation as of 31 Dec 2022      Top 5 Holdings
                                               Company                 Country       Sector       % NAV
                                               Saudi National Bank     Saudi Arabia  Financials   9.4%
                                               Qatar Gas Transport     Qatar         Energy       9.3%
                                               Qatar Navigation        Qatar         Industrials  7.2%
                                               Alamar Foods            Saudi Arabia  Consumer     6.4%
                                               Integrated Holding Co.  Kuwait        Industrials  4.3%
 Source: QIC; as of 31 December 2022

 

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