Dantes Outlook Market Podcast
How we invest in Gulf equities
Episode Summary
For decades, the shorthand on Gulf markets has been simple: when oil rises, Saudi and UAE equities rise with it. Recently, that relationship has broken. Crude rallied over the past year while Saudi and UAE equities trailed. In this episode we walk through why our portfolios no longer view Gulf equities as a pure-play on energy. Instead, we view the region as a structural non-oil development play. We also look at 342 Saudi funds against the local index, where the results are uncomfortable: the typical Saudi equity fund significantly underperformed the TASI benchmark, and cash was the only category where the median fund beat the benchmark. Global multi-asset funds have outperformed riskier domestic-focused funds that were exposed to IPOs this year.
Episode Notes
Key takeaways
- Saudi equities have drifted to roughly zero sensitivity to oil once global equity movement is accounted for. UAE equities now move against crude, driven by property rather than energy.
- Aramco and the petrochemical names are close to 19% of the Saudi index, yet Aramco rose about 15% as crude rose 31%. Under half the move reached shareholders.
- Real estate is about 18% of the UAE market and fell roughly 20%, with one developer causing most of the damage. Energy is only about 9%.
- Financials are roughly 40% of each market, which is why both now track global sentiment more closely than the oil price.
- Only about one in four Saudi equity funds beat TASI. Cash and sukuk funds returned a median of 3.8%, and nearly half of all fund assets in the Kingdom already sit there.
- The gap between the best and worst Saudi equity fund exceeded 24 points in a market that moved 3.2%. Selection mattered far more than allocation.
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