Middle Eastern fund managers are planning to boost investments in Egypt in the current quarter, according to a Reuters poll. They said Saudi Arabia and the United Arab Emirates are most vulnerable to tumbling oil prices and the coronavirus pandemic, the poll showed. The region, which is mostly under lockdown as it deals with the coronavirus outbreak, is home to many oil producers, who have seen the price of their main resource fall as they spend to help support their economies. "Overall we expect the combination of COVID-19 and low oil prices to weigh on regional GDP growth, stress some of the weak corporate balance sheets and filter into earnings downgrades over the next few quarters," Mohamed Eljamal of Waha Capital, told Reuters. Dubai, whose stock index has plunged 27 percent this year, has been the worst-hit Gulf market, after a coronavirus-related shutdown choked its tourism and aviation industry. The main index in oil producer Abu Dhabi is down almost 17 percent this year as well. The majority of the managers told Reuters that the UAE, and particularly Dubai, would be the market worst hammered by the coronavirus crisis. However, the managers have highlighted to a rebound in share prices this month as evidence that some stocks are now seen as undervalued, and that investments pulled out of harder-hit sectors are finding new homes. Four of the seven managers polled told Reuters they would still raise their allocations in the UAE this quarter. Dubai is up about 14 percent since March 31, and Abu Dhabi is up 13 percent. Managers further said that they had pulled out of stocks in sectors of tourism, trade, and service. "We have instead purchased some fundamentally strong names with strong balance sheets across markets which we think were unfairly punished due to a combination of corona and oil slump," Richard Lee, Senior Portfolio Manager at Emirates NBD Asset Management, told Reuters. Eljamal added: "We have … significantly raised cash and (are) currently ready to hunt for bargains over the next few months." Most managers told Reuters that Saudi Arabia would be the market most affected by the oil price decline. According to a data this week, Saudi central bank's foreign reserves had dropped in March at their fastest rate in at least 20 years and to their lowest since 2011, while the kingdom slipped into a $9 billion budget deficit through the first quarter. Four of the seven polled told Reuters they would keep their levels of allocation steady for the upcoming quarter, although at least one had lowered levels in the last quarter. The Saudi stock index has dropped 15 percent year-to-date, but up around 9 percent this quarter. Despite reducing exposure to vulnerable stocks in the petrochemical sector, "it also gave us an opportunity to invest in interesting names that were earlier trading at lofty valuations but are trading at more reasonable valuations now", Lee told Reuters. In addition, majority of fund managers polled told Reuters they would boost their allocations in Egypt, despite that market's exposure to coronavirus due to its dependence on tourism sector and remittances from the Gulf. Despite losing almost a quarter of its value this year, Egypt's main stock index EGX 30 is up 10 percent this quarter. One manager polled told Reuters that, although Egypt was exposed, it is one of the few countries that could potentially register positive growth this year, due to foreign reserves and credit lines with international financial institutions.
