TIDMGIF
RNS Number : 4389Z
Gulf Investment Fund PLC
11 January 2024
11 January 2024
Legal Entity Identifier: 2138009DIENFWKC3PW84
31 December 2023
Gulf Investment Fund plc (GIF) Quarterly Report for 3 months to
31 December 2023
-- Net Asset Value (NAV) up 10.6 per cent (S&P GCC Index up
6.1 per cent).
-- In 2023 GIF NAV rose 32.1 per cent versus the benchmark which
was up 10.0 per cent (22.1 per cent outperformance)
-- Outlook for the GCC is good with socio-economic reforms,
tourism initiatives and continuing investment in infrastructure
projects.
-- GIF traded at a 13.2 per cent discount to its NAV as of
31(st) December 2023.
Performance
GIF outperformed its benchmark (S&P GCC Composite Index) in
the quarter to 31 December by 4.6 per cent. Outperformance in the
quarter came from holdings in Saudi and Qatar and an underweight
position in Kuwait and Dubai.
The Israel-Hamas conflict initially led to volatility in GCC
markets. However, they have largely recovered from the lows in
October given the very low economic exposure to Israel and
Palestine. We expect markets to continue to make progress on the
back of continuing regional reforms and infrastructure
spending.
In terms of stocks, performance came from holdings in Middle
East Healthcare (up 60.3 per cent in the quarter) Saudi National
Bank (up 17.8 per cent) Integrated Holding Co. (up 18.1 per cent)
Saudi Airlines Catering (up 25.2 per cent) and Saudi Ground Service
(up 22.1 per cent).
Holdings that dragged on performance were Cenomi Retail (down
15.4 per cent) Qatar Navigation (down 5.4 per cent) and Qatar
Insurance Company (down 3.0 per cent).
In 2023 as a whole the GIF NAV is up 32.1 per cent,
outperforming the benchmark by 22.1 per cent.
On 31 December 2023, the GIF share price was trading at a 13.2
per cent discount to NAV (five-year average discount 6.3 per
cent).
Portfolio changes
GIF increased exposure to financials, materials, and consumer
discretionary sectors, as valuations look undemanding coupled with
attractive growth profiles.
The financials sector weighting increased to 46.3 per cent of
NAV in the quarter from 38.5 per cent in Q3, as Gulf Bank of
Kuwait, Arab National Bank and Bank Muscat joined the
portfolio.
Exposure to the materials sector increased from zero to 5.5 per
cent as Advanced Petrochemical, City Cement and Yamama Cement were
added to the portfolio. Given their proximity to megaprojects and
current relatively low capacity-utilization, Yamama and City Cement
are set to enjoy increased demand.
Exposure to healthcare increased by 1.2 per cent points as GIF's
healthcare holding, Middle East Healthcare increased in value.
The fund reduced exposure to industrial, energy and real estate
sectors.
In terms of GCC markets, GIF increased weight in Saudi Arabia by
7.6 per cent points to 59.3 per cent (vs benchmark weight of 61.4
per cent). The fund remains overweight Qatar (24.8 per cent vs an
index weighting of 10.0 per cent), underweight UAE (7.1 per cent vs
benchmark weight of 17.7 per cent) and Kuwait (6.5 per cent vs
benchmark weight of 9.3 per cent). Qatar still trades at a discount
to its GCC peers, trading at 12.9 times earnings (GCC average is
16.6 times).
GIF ended the quarter with 28 holdings: 16 in Saudi Arabia, 7 in
Qatar, 2 in the UAE, 2 in Kuwait and 1 in Oman. The cash holding is
minimal.
Outlook
Gulf Cooperation Council (GCC) is a region with a robust
economic diversification plan to reduce reliance on oil. Mega
infrastructure projects, tourism initiatives and socio-economic
reforms all contribute to a positive outlook for the region. The
IMF expects GCC real GDP growth to be 1.5 per cent and 3.7 per cent
in 2023 and 2024 respectively. Non-oil GDP growth is expected to be
4.3 per cent and 4.0 per cent in 2023 and 2024.
Tourism-related industries are a driver of non-energy growth.
Qatar saw the strongest growth, globally, of international tourist
arrivals in Jan-July 2023; 95 per cent higher than in 2019. Saudi
Arabia was second with a 58 per cent increase on 2019. Visitors to
Dubai increased by 21.9 per cent in the Jan-Oct 2023 period, with
13.9 million visitors, surpassing pre-pandemic levels. The Middle
East is the only world region to surpass 2019 levels in this
period.
OPEC predicts year-on-year growth of oil demand of 2.5 million
bpd in 2023 and 2.2 million bpd in 2024. The IMF projects GCC
inflation at 2.6 per cent and 2.3 per cent in 2023 and 2024,
providing governments in the region with the room to increase
fiscal spending.
The GCC countries are actively engaged in transformative
socio-economic reforms. Post-pandemic, there's notable progress in
social and business-friendly reforms, fiscal sustainability, and
strategic investments in digital and green infrastructure.
GIF Country Allocation as of 31 Dec 2023 Top 5 Holdings
==========================================
Company Country Sector %
NAV
==========================================
Saudi National Bank Saudi Arabia Financials 9.5%
Middle East Healthcare Saudi Arabia Health Care 6.2%
Saudi British Bank Saudi Arabia Financials 6.1%
Qatar Navigation Qatar Industrials 5.4%
Integrated Holding Company Kuwait Industrials 5.0%
============================ ============== ======================================================== =====
Source: QIC; as of 31 Dec 2023.
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