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Al Aseel Islamic Equity Fund
Main Highlights |
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Al Aseel’s performance suffered from Sep – Feb on account of market corrections in the GCC. Despite these corrections, the long term outlook of the GCC markets still looks positive. |
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We expect GCC returns to be above average in the long term. |
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Notwithstanding the fund’s recent performance, the fund has outperformed the GCC ex Saudi Islamic Benchmark during the same period. |
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The GCC markets produced stellar returns from 2002-2005 due to high oil prices, abundance of liquidity, high corporate earnings growth and limited international investment landscapes |
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As a result of the recent correction, valuation parameters look interesting: |
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Kuwait, Oman and Bahrain look reasonably valued |
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Qatar and the UAE have started to throw interesting investment opportunities |
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Saudi Arabia still looks overvalued |
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| Performance Statistics – NAV ($) |
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| Country Allocation – Current |
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| Top Holdings – February 2006 |
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| Portfolio Statistics – Current |
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Performance Analysis
| Al Aseel vs GCC ex Saudi Islamic Benchmark |
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As a result of the fund’s absence in the Saudi market, an appropriate performance benchmark is to compare the fund to a GCC Islamic benchmark, excluding Saudi stocks. |
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On this basis, the fund has outperformed the GCC ex Saudi Islamic benchmark for the period Sep-2005 to Feb-2006. |
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SICO Investment Approach
Investment Strategy |
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We remain positive about long term economic growth in the region. |
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We believe that the present market environment requires an active bottom-up investment approach to generate above average returns. |
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We continuously assess the market conditions and dynamically adjust cash, sector and country allocations in order to enhance returns and lower downside risk of the portfolio. |
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We would primarily be focusing on companies that derive a major portion of their incomes from core operations and where earnings are sustainable in nature |
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In terms of sectors, we like telecoms and cement & construction because of their solid fundamentals and long term growth potential |
GCC Markets Outlook
Macro economic environment remains conducive |
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Most of the GCC countries are expected to experience decent economic growth rates going forward |
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2006 Estimated Real GDP Growth Rates (%) |
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| PE Multiples |
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The Price earnings multiples for most of the GCC markets have shrunk considerably and have started to look reasonable especially in the context of the growth that the region is experiencing |
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2006 PER (x) |
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| Return on Equity |
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The GCC markets have high ROEs that should keep long-term investors interest intact in these markets |
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ROE 2005 (%) |
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SICO Market Strategy
Conclusion |
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In the short term, GCC markets are expected to remain volatile |
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However, the long term prospects of these markets still remain positive |
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We believe that an investor with a long-term horizon and a portfolio of stocks with strong fundamentals and balance sheets should be able to generate above average long term returns |
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