Funds Global MENA asked a range of asset managers for their assessment of the past year and their predictions for the coming 12 months.
ERIC ANDERSON, SENIOR GLOBAL EMERGING MARKETS PORTFOLIO MANAGER, MILLTRUST INTERNATIONAL
What are your top investment concerns?
This remains one of the world’s most complex regions defined by geopolitical tensions, regional conflicts, unique political and legal structures and the changing social landscape (large youth population, unemployment and women’s rights). Any setback from the above could stall the realisation of the growth potential in the region. This is particularly significant in Saudi Arabia, where the country is currently immersed in a major domestic economic revival programme which could collapse should serious conflicts arise or the political environment deteriorate. The same applies to the UAE, whose business model relies on political stability in the region. Obviously, many MENA countries rely on crude oil to support their growth, so oil price remains an important risk factor to monitor until we see enough diversification in the different market economies.
Do you think the region will sustain economic diversification efforts given the good oil run at present?
As we have seen across most emerging markets in 2018, geopolitical tensions can cloud investment opportunities, weigh heavily on sentiment and cause heightened volatility in the short term regardless of the underlying fundamentals. These tensions are the noise and subsequent volatility that investors have to bear until reform measures take over the headlines. The key challenge is to avoid being embroiled in these short-term developments and instead use this opportunity to build positions in high-quality businesses whose valuations have been beaten down. These tend to be more domestically focused businesses and sectors that are more insulated from global risks; for instance, in Saudi Arabia, our local team has found opportunities in key domestic areas like education, healthcare, insurance and entertainment.