This commentary has been based on information obtained from sources believed to be reliable, no representation or warranty is made byCIMB Wealth Advisors Berhad and its investment managers, CIMB-Principal Asset Management Berhad nor the acceptance of anyresponsibility or liability is made as to its accuracy, completeness or correctness of the information contained herein. Expressions of opinioncontained herein are those entirely of CIMB Wealth Advisors and the information is subject to change without notice. This commentary isprovided for information purposes only and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sellsecurities. It may not be reproduced, distributed or published by any recipient for any other purpose.
CIMB-Principal MENA Equity Fund
Investment Services Department +60 (3) 7718 5043
09 June 2008
Massive government expenditure on infrastructure
GCC countries are planning on spending US$1.5 Trillion on infrastructure in the next 5 years and thisis expected to boost for economic growth in the MENA region. Government focuses on buildingstrong industrial base in order for an improvement in petrochemical and downstream activities,transport and logistic business.
Population growth – strong future domestic demand
GCC region has population of 100 million, which its population growth rate is increasing year on year and higher than developed and emerging market. Half of the region population is below the age of 20implies a large emerging consumer market and large labour force. The higher population growth hasa strong domestic demand which drives a long term stable growth.
Undervalued markets – attractive valuations
MENA markets are undervalued markets with attractive valuation. This undervalued region hasattractive stock markets, with reasonable valuations and strong IPO activities, which will lead to apotential strong future growth.
High market capitalization and turnover
GCC economies form 16.5% of global emerging market capitalization with high liquidity. For instance,Saudi Arabia has the higher market capitalization of US$420.39b and trading value of US$2092mover three 3 months, followed by Kuwait which has market capitalization of US$189.15 and tradingvalue of US$532m.
Low correlation to World Markets
MENA markets have low correlations to world market. The correlations to global equities are muchlower compared to world Asia, Latin America or Emerging Markets. This delivers portfoliodiversification with powerful potential growth. During time of jitters, MENA has been more resilientcompared to other emerging markets implying a more defensive strategy in an EM portfolio by MENAin times of high volatility.
Under researched region/market
Interest in MENA markets is increasing as the research coverage is gradually increasing. There is anopportunity to enter the market in the early stages, provided the PEs for the region are relatively lowcurrenltly, in order to discover undervalued stocks and exploit inefficiencies.