Agoracom

Amid the international oil price hike, funds investing in the Middle East are rising as an alternative amid bearish global stock markets.

``I think it is an excellent opportunity to invest in the region,'' said Mark Krombas, a fund manager of Societe Generale Asset Management in charge of the ``Frontier Middle-East Fund.'' IBK Societe Generale Asset Management launched the fund here, giving local investors a chance to join the oil dollar boom.

The fund invests in the Middle East and North African countries, which saw more than 5 percent economic growth annually in the past three years, fuelled by rising oil revenue. Qatar, for example, had 39.4 percent real GDP growth during the last three years. The fund manager said the economy is expected to grow 10 percent this year.

The Middle East & North Africa Equities Composite has recorded 44.83 percent in annualized returns during the last five years.

On top of rising oil prices, Krombas cited strong domestic demand, a young population, and rising investment spending as engines of growth in the region.

``Half of the population of this region is below age 20. Before you get married in the Middle East, you, the husband should provide the house. That means very, very large demand for real estate.'' Real estate stocks take up a considerable part of the fund's portfolio.

He stressed the massive infra investment going on in the region. ``Oil and gas is having a big spillover effect in the region.'' Krombas said the countries are investing very heavily in infrastructure with the money, on top of paying off debt and buying in the United States and Europe through sovereign funds. According to an HSBC, investment spending in the Gulf Cooperation Council (GCC) countries has risen 86 percent from 2003 to 2007. ``About 41.1 percent of GDP will be invested in infrastructure.'' He said the four construction companies in the fund are enjoying a 10 percent net margin.

The region is also seeing a sharp increase in FDI flows in 2006, growing 40 percent to $24.4 billion.

On top of ample liquidity, he cited disconnection with world markets as the region's main strength. ``Foreign ownership in the Middle East is very low,'' Krombas said. According to a HSBC report, GCC markets, comprising Saudi Arabia, Kuwait, Oman, UAE, Bahrain and Qatar, have actually risen during times when global emerging markets have come under pressure. The correlation between MSCI GCC and S&P500 recorded -0.04.

Still, the valuation is relatively attractive. Qatar's price earnings ratio stood at 12.8 in 2007, and Oman at 8.5.