FRANKFURT: Egypt and Saudi Arabia are two of the countries with the highest growth potential in the Middle East and North African (MENA) region, according to global fund manager ING Investment Management. Fadi Al Said, head of equities at ING's Middle East Investment Team which also oversees its Middle East and North Africa Fund, said the countries were particularly interesting as investment plays. "They both have a very high proportion of under-20-year-olds, providing the opportunity to build niche markets and diversify" away from petrochemicals, he added. By May 3, the Dubai-based fund was up 15.4 percent year to date, outperforming its benchmark index, the MSCI Arabian Markets ex SA Index, which rose 9.8 percent in the same period. The fund launched in December 2008 has about $48 million in assets under management. Among its top 10 holdings are Red Sea Housing, Gulf International Services, Ras Al Khaimah Ceramics and Burgan Bank. "For our holdings we look to cooperate with companies that can benefit from the themes that are relevant in the region, such as the development of infrastructure, the growth of the middle class and consumer spending," he told Reuters. Over the past two years, the fund has progressively changed its top 10 holdings, tending away from petrochemicals and towards a more diversified portfolio including groups from the financial and service sectors. Citing the global urbanization trend, Said saw investment opportunities in the food industry and particularly fertilizers. "We are positive on consumer-related names and financial names, and we are positive on fertilizer-related companies." He cited growing demand for meat products and a steady decline in the farming industry. Paradigm Shift In its April report, the fund made positive comments about Qatar, praising it as a one of the fastest growing countries driven by new roll-out of liquid natural gas (LNG) production. A month later, however, Said showed caution. "Although it is the fastest-growing country in the region and is very ambitious in regards to infrastructure, health, education and sport," the challenge posed by its small population was worth considering when investing, he said. A Reuters poll showed that growth prospects for many of the key Gulf Arab economies worsened slightly in 2010 as oil prices remain volatile following Europe's debt woes and credit growth stays low. The fund is also interested in UAE-based budget airline Air Arabia. Although it is not yet in its top 10 holdings, Said said he sees huge growth potential for the airline. Based on the success of British budget airline easyJet and Irish airline Ryanair, Said said that the fund would like to be "part of Air Arabia's growth". The Arab world's largest listed airline said this week it had signed an agreement to launch Jordan's first low-cost carrier and announced its fourth regional hub.
