Fund Manager's Strategy & Outlook
The EFG-Hermes Saudi Arabia Equity Fund October 2016
Fund Manager’s Strategy & Outlook
Objective
The Saudi market had a strong performance in October with the TASI Index gaining 6.9% for a YTD loss of 13.01%. The Fund gained 3.2% .Fund & Outlook duringManager’s the monthStrategy and is now down 16.8% YTD. Turnover gained MoM with daily traded value averaging SAR 3.04 billion as investors returned The MEDA Fund summer added 5.1% in December to close 2007 at 50.4%, while from the long vacation.
The principal objective of the Fund is medium and long term capital appreciation through investing in Saudi Arabian equity and equity related securities.
registering its sixth consecutive year of positive returns. The Investment Saudi Arabia successfully issued maiden international The size Manager’s decision to overweight theitsGCC markets at the startbond. of the year of the offering increased USD 15bn to 17.5bn and the benefited the Fundwas as the majorityfrom of the attribution forUSD the 2007 returns offer from received interest to the tune closed of USD has note, partially came the GCC. The MENA markets the67bn. year on This a strong with the Saudi market leading the waysituation for the second consecutive month alleviated the domestic liquidity and together with thewtih 90-day an 18% return for UAE alsoSaibor performed withfrom repo issuance by December. SAMA, hasThe seen themarkets 3-month comewell down Dubai and in Abu Dhabi advancing and10-year 9.5%, respectively. its highs mid-October. The11% Saudi CDS has also fallen to below
1.60% vs. 2.07% towards the end of September.
In North Africa, the Egyptian market maintained its strong momentum The government announced a cut in The certain allowances government registering an 8% return in December. financial servicesfor sector was employees whichperformers, is expected result in an average cut of among the standout and thetoFund’s holdings benefited from this rally. Moreover, the continues The to retain a minor also exposure to the an approximately 12%Fund to salaries. government announced Jordanian Moroccan markets. increase and in municipal fees such as commercial licenses, trash collection,
ATM licenses, new construction permits and renewing of certain licenses
In the GCC markets, the Saudi Arabian market displayed a strong and permits, etc. This will pressurize the retail sector earnings the most. performance throughout the month. The rally was broad based with the Earningsand forpetrochemical Q3 2016 were weakleading with total aggregate profit about declining banking sectors the way. Speculation opening 3% YoYthe at market SAR 26.5bn, to foreign mainly investors led by in 5% the near YoY future decline coupled in Banks withearnings the gradual retail investor has helped that market (mainlyrestoration on lower of fee income andconfidence deteriorating asset drive quality). Consumer higher. The Investment Manager reshuffled the Fund’s sector earnings were 21% lowerhas YoY, while cement sectorpositions earningstowere capitalize on the strong two-month rally. down by 30% YoY.
Allthe TASI sectors were up in October, exceptthe fortop theperforming Cement sector which In UAE, the real estate sector was among sectors. wasFund down 9.2%. Industrials, sectors were among The was well positioned to Banks benefitand fromReal this Estate rally and we maintain a positive on the Dubai and Abu Dhabi13.3%, markets and given11% the attractive the topview performing, gaining 14.1%, respectively. valuations and compelling earnings growth outlook.4.2%. Petrochemicals underperformed gaining The Investment Manager increased exposure to select Banks, Real Estate, and Consumer
The Investment Manager maintains a positive outlook on the MENA markets non-Discretionary names, while reducing exposure to Consumer going into 2008. Increased IPO and M&A activity, attractive valuations and Discretionary names. Cash increased to 14% at month end. earnings growth rates, coupled with the currency revaluation possibility should Brent be lostthe 4.2% supporting in October drivers to end for 2008. the month Furthermore, at USDongoing 48.61/barrel. structural There changes with respect to corporatewithin governance an increased were signs of disagreement OPEC,should and result Russiain indicated that it interest from foreign institutional investors who instrumental driving has a spare capacity of 4mn bpd which putwere pressure on Oilinprices. the markets higher in 2007.
With lower government spending due to lower oil prices, earnings and revenues for companies under pressure, the implementation of the NTP 2020 and the upcoming budget, the Investment Manager maintains his cautious view on the market in the short term. EFG-Hermes Saudi Arabia Equity Fund
Tadawul All Share Index
Fund Performance Month to Date** YTD 2015 2014 2013 2012 2011 Inception to Date*
TASI1 6.9% -13.0% -17.1% -2.4% 25.5% 6.0% -3.1% -38.7%
Saudi Fund 3.2% -16.8% -3.4% 17.2% 48.8% 11.2% 1.8% 5.8%
Difference -3.7% -3.8% 13.7% 19.6% 23.3% 5.2% 4.9% 44.5%
*Fund’s inception date was June 17th, 2008 ** MTD figures reflect performance between September 30, 2016 and October 31, 2016. TASI is a price return index
1
Fund Characteristics No. of Holdings Weighted Market Cap Dividend Yield* P/E Ratio 16
24 SAR 48.1 billion 4.4% 16.7
*Figure reflects the weighted average yield of a dividend-bearing security in the fund
Fund Metrics Saudi Fund 22.9% 1.0
Volatility Beta *
TASI 22.7% -
**Calculated vs. the Tadawul All Share Index (TASI) since the Fund’s inception
Top Three Equity Holdings Holding Al Rajhi Bank Samba Financial Group Saudi Basic Industries Corp
Sector Banks & Financial Services Banks & Financial Services Petrochemical Industries
% of NAV 8.0% 7.5% 6.4%
Fund Data NAV per Share Management Fee Minimum Subscription Subscription / Redemption Inception Date
SAR 10.5846 2% SAR 50,000 Twice Weekly June 17, 2008
Fund Identifiers ISIN Code Bloomberg Ticker Reuters Code
XC000A1W4DX3 EFGSAUD AB LP65122906
Allocation by Economic Sector
80% 60% 40%
Transport 2.6%
20%
Cash 14.0%
Agriculture & Food Industries 12.7%
Telecom & IT 4.7%
0% -20% -40%
Banks & Financial Services 25.0%
Retail 8.9%
-60%
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
-80%
EFG-Hermes Asset Management Tel: 966 11 293 8048/9 Fax: 966 11 293 8032 e-mail : [email protected]
Energy & Utilities 3.1%
Real Estate Development 5.8% Petrochemical Industries 14.1%
Multi-Investment 1.5%
Insurance 7.6%
This update does not constitute an offer of shares and should not be relied upon by any person acquiring or otherwise dealing in shares of the company. Subscription of shares in the company may only currently be made on the terms of the Information Memorandum of the company. It should be noted that investment in the fund is only suitable for sophisticated investors who are aware of the risks of investing in the EFG-Hermes Saudi Arabia Equity Fund and should be regarded as long term. Please remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of shares and the income from them to fluctuate and you may get back less than you invested when you decide to sell your share.
Fund Manager’s Strategy & Outlook
Objective
The Saudi market had a strong performance in October with the TASI Index gaining 6.9% for a YTD loss of 13.01%. The Fund gained 3.2% .Fund & Outlook duringManager’s the monthStrategy and is now down 16.8% YTD. Turnover gained MoM with daily traded value averaging SAR 3.04 billion as investors returned The MEDA Fund summer added 5.1% in December to close 2007 at 50.4%, while from the long vacation.
The principal objective of the Fund is medium and long term capital appreciation through investing in Saudi Arabian equity and equity related securities.
registering its sixth consecutive year of positive returns. The Investment Saudi Arabia successfully issued maiden international The size Manager’s decision to overweight theitsGCC markets at the startbond. of the year of the offering increased USD 15bn to 17.5bn and the benefited the Fundwas as the majorityfrom of the attribution forUSD the 2007 returns offer from received interest to the tune closed of USD has note, partially came the GCC. The MENA markets the67bn. year on This a strong with the Saudi market leading the waysituation for the second consecutive month alleviated the domestic liquidity and together with thewtih 90-day an 18% return for UAE alsoSaibor performed withfrom repo issuance by December. SAMA, hasThe seen themarkets 3-month comewell down Dubai and in Abu Dhabi advancing and10-year 9.5%, respectively. its highs mid-October. The11% Saudi CDS has also fallen to below
1.60% vs. 2.07% towards the end of September.
In North Africa, the Egyptian market maintained its strong momentum The government announced a cut in The certain allowances government registering an 8% return in December. financial servicesfor sector was employees whichperformers, is expected result in an average cut of among the standout and thetoFund’s holdings benefited from this rally. Moreover, the continues The to retain a minor also exposure to the an approximately 12%Fund to salaries. government announced Jordanian Moroccan markets. increase and in municipal fees such as commercial licenses, trash collection,
ATM licenses, new construction permits and renewing of certain licenses
In the GCC markets, the Saudi Arabian market displayed a strong and permits, etc. This will pressurize the retail sector earnings the most. performance throughout the month. The rally was broad based with the Earningsand forpetrochemical Q3 2016 were weakleading with total aggregate profit about declining banking sectors the way. Speculation opening 3% YoYthe at market SAR 26.5bn, to foreign mainly investors led by in 5% the near YoY future decline coupled in Banks withearnings the gradual retail investor has helped that market (mainlyrestoration on lower of fee income andconfidence deteriorating asset drive quality). Consumer higher. The Investment Manager reshuffled the Fund’s sector earnings were 21% lowerhas YoY, while cement sectorpositions earningstowere capitalize on the strong two-month rally. down by 30% YoY.
Allthe TASI sectors were up in October, exceptthe fortop theperforming Cement sector which In UAE, the real estate sector was among sectors. wasFund down 9.2%. Industrials, sectors were among The was well positioned to Banks benefitand fromReal this Estate rally and we maintain a positive on the Dubai and Abu Dhabi13.3%, markets and given11% the attractive the topview performing, gaining 14.1%, respectively. valuations and compelling earnings growth outlook.4.2%. Petrochemicals underperformed gaining The Investment Manager increased exposure to select Banks, Real Estate, and Consumer
The Investment Manager maintains a positive outlook on the MENA markets non-Discretionary names, while reducing exposure to Consumer going into 2008. Increased IPO and M&A activity, attractive valuations and Discretionary names. Cash increased to 14% at month end. earnings growth rates, coupled with the currency revaluation possibility should Brent be lostthe 4.2% supporting in October drivers to end for 2008. the month Furthermore, at USDongoing 48.61/barrel. structural There changes with respect to corporatewithin governance an increased were signs of disagreement OPEC,should and result Russiain indicated that it interest from foreign institutional investors who instrumental driving has a spare capacity of 4mn bpd which putwere pressure on Oilinprices. the markets higher in 2007.
With lower government spending due to lower oil prices, earnings and revenues for companies under pressure, the implementation of the NTP 2020 and the upcoming budget, the Investment Manager maintains his cautious view on the market in the short term. EFG-Hermes Saudi Arabia Equity Fund
Tadawul All Share Index
Fund Performance Month to Date** YTD 2015 2014 2013 2012 2011 Inception to Date*
TASI1 6.9% -13.0% -17.1% -2.4% 25.5% 6.0% -3.1% -38.7%
Saudi Fund 3.2% -16.8% -3.4% 17.2% 48.8% 11.2% 1.8% 5.8%
Difference -3.7% -3.8% 13.7% 19.6% 23.3% 5.2% 4.9% 44.5%
*Fund’s inception date was June 17th, 2008 ** MTD figures reflect performance between September 30, 2016 and October 31, 2016. TASI is a price return index
1
Fund Characteristics No. of Holdings Weighted Market Cap Dividend Yield* P/E Ratio 16
24 SAR 48.1 billion 4.4% 16.7
*Figure reflects the weighted average yield of a dividend-bearing security in the fund
Fund Metrics Saudi Fund 22.9% 1.0
Volatility Beta *
TASI 22.7% -
**Calculated vs. the Tadawul All Share Index (TASI) since the Fund’s inception
Top Three Equity Holdings Holding Al Rajhi Bank Samba Financial Group Saudi Basic Industries Corp
Sector Banks & Financial Services Banks & Financial Services Petrochemical Industries
% of NAV 8.0% 7.5% 6.4%
Fund Data NAV per Share Management Fee Minimum Subscription Subscription / Redemption Inception Date
SAR 10.5846 2% SAR 50,000 Twice Weekly June 17, 2008
Fund Identifiers ISIN Code Bloomberg Ticker Reuters Code
XC000A1W4DX3 EFGSAUD AB LP65122906
Allocation by Economic Sector
80% 60% 40%
Transport 2.6%
20%
Cash 14.0%
Agriculture & Food Industries 12.7%
Telecom & IT 4.7%
0% -20% -40%
Banks & Financial Services 25.0%
Retail 8.9%
-60%
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
-80%
EFG-Hermes Asset Management Tel: 966 11 293 8048/9 Fax: 966 11 293 8032 e-mail : [email protected]
Energy & Utilities 3.1%
Real Estate Development 5.8% Petrochemical Industries 14.1%
Multi-Investment 1.5%
Insurance 7.6%
This update does not constitute an offer of shares and should not be relied upon by any person acquiring or otherwise dealing in shares of the company. Subscription of shares in the company may only currently be made on the terms of the Information Memorandum of the company. It should be noted that investment in the fund is only suitable for sophisticated investors who are aware of the risks of investing in the EFG-Hermes Saudi Arabia Equity Fund and should be regarded as long term. Please remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of shares and the income from them to fluctuate and you may get back less than you invested when you decide to sell your share.
