Fund Manager's Strategy & Outlook
The EFG-Hermes Saudi Arabia Equity Fund September 2017
Fund Strategy & Outlook
Objective
The market had a flat performance in September with both TASI and the Fund gaining 0.3%,Manager’s with YTD outperformance of the fund remaining at 6.7%. Turnover increased 9.6% MoM with daily traded value averaging SAR 3.14bn.
The principal objective of the Fund is medium and long term capital appreciation through investing in Saudi Arabian equity and equity related securities.
Sector-wise performance in August was mixed with Commercial & Professional Services, Consumer Services and Diversified Financial sectors gaining 12.3%, 7.9% and 6.4%, respectively. Telecom, Real Estate and Healthcare were among the worst performing sectors losing 9.5%, 8.6% and 8%, respectively. Materials gained 1.1% during the month and banks stood flat for the month.
Fund Performance
Brent was 9.8% higher in September, ending the month at USD 55.37/barrel, and on average was 6.6% higher MoM. It is expected that the OPEC and Non-OPEC agreements for supply cuts could be extended until the end of 2018. The big headline in Saudi Arabia was that of women being allowed to drive from June 2018. Labor force participation for the women is expected to increase. This is postive for the retail, banking and transportation sectors. FTSE announced a delay in Saudi Arabia entering the FTSE GEIS Index. FTSE Russell proposes to bring forward the next formal assessment of Saudi Arabia’s classification status to March 2018 when the timing of inclusion will be made. The tone of the announcement was extremely positive. Excess liquidity in the banking system continued to be deployed to buy government bonds (now 10.0% of assets). This continues to contribute to elusive loan growth (just 0.3% MoM). The share of time deposits reached 29.9%. POS transactions were up 11% M-o-M and cash withdrawals from ATMs were up 20% MoM. The government raised USD 12.5bn in the second dollar bond this year and has received 345k bills worth SAR 525bn from the private sector’s contractor entities during FY16/17; 98% of the bills were paid within 60 days. There were reports that the Saudi government is re-drafting the NTP, pushing out some target dates and clarifying responsibilities to facilitate implementation. The reported delay of Saudi Aramco’s IPO were denied by the company. It is expected that the government will raise local gasoline pricing to market levels by November. Corporate activity continued with Savola selling a 2% stake ($0.3bn) in Almarai to institutional investors on September 12, and Credit Agricole selling a 16% stake ($1.5bn) in Banque Saudi Fransi to Kingdom Holding on September 20. Cement sales volumes fell 6.9% YoY in September 2017 and were 15.5% lower MoM. Construction activity is still slow and the sector keeps suffering on account of cuts in government spending on infrastructure. The focus for the near term would be the Q3 results. We expect strong results for the petrochemical sector; results are expected to be stable for banks and negative for the cement sector. The market is expected to remain volatile and range bound in the 6,8007,200 band in the near term. 100%
EFG-Hermes Saudi Arabia Equity Fund
Saudi Fund 0.3% 7.7% -1.9% -3.4% 17.2% 48.8% 11.2% 1.8% 34.5%
TASI1 0.3% 1.0% 4.3% -17.1% -2.4% 25.5% 6.0% -3.1% -25.8%
Fund Characteristics No. of Holdings Weighted Market Cap Dividend Yield* P/E Ratio 17
28 SAR 69.4 billion 3.6% 16.2
*Figure reflects the weighted average yield of a dividend-bearing security in the fund.
Fund Metrics Saudi Fund
Volatility Beta*
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 Dec-16 Mar-17 Jun-17 Sep-17
EFG-Hermes Asset Management Tel: 966 11 293 8048/9 Fax: 966 11 293 8032 [email protected]
22.5% -
*Calculated vs. the Tadawul All Share Index (TASI) since the Fund’s inception
Top Holdings Holding
Al Rajhi Bank Saudi Basic Industries Corp National Commercial Bank
Sector
% Holding
Banks Materials Banks
12.1% 8.9% 6.8%
Fund Information NAV per share Launch Date Management fee Minimum Subscription Subscription/Redemption
SAR 13.4467 June 17, 2008 2% SAR 50,000 Twice Weekly
Allocation by Economic Sector
Retailing 2.0%
Telecommunication Services 2.9%
Transportation 3.4%
Utilities 3.3%
Energy 2.1% Banks 27.9% Capital Goods 2.1% Cash 0.5%
Materials 21.3%
-50%
TASI
22.5% 0.97
Real Estate Management & Development 8.2%
0%
Difference 0.0% 6.7% -6.2% 13.7% 19.6% 23.3% 5.2% 4.9% 60.3%
* MTD figures reflect performance between August 31, 2017 and September 30, 2017 ** Fund’s inception date was June 17, 2008 1 TASI is a price return index
Tadawul All Share Index
50%
-100%
Month to Date* YTD 2016 2015 2014 2013 2012 2011 Inception to Date**
Insurance 8.8%
Fund Indentifiers ISIN Reuters Code Bloomberg Ticker
Consumer Services 2.7% Health Care Equipment & Services 6.1%
Food & Beverages 8.8%
XC000A1W4DX3 LP65122906 EFGSAUD AB
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 Strategy & Outlook
Objective
The market had a flat performance in September with both TASI and the Fund gaining 0.3%,Manager’s with YTD outperformance of the fund remaining at 6.7%. Turnover increased 9.6% MoM with daily traded value averaging SAR 3.14bn.
The principal objective of the Fund is medium and long term capital appreciation through investing in Saudi Arabian equity and equity related securities.
Sector-wise performance in August was mixed with Commercial & Professional Services, Consumer Services and Diversified Financial sectors gaining 12.3%, 7.9% and 6.4%, respectively. Telecom, Real Estate and Healthcare were among the worst performing sectors losing 9.5%, 8.6% and 8%, respectively. Materials gained 1.1% during the month and banks stood flat for the month.
Fund Performance
Brent was 9.8% higher in September, ending the month at USD 55.37/barrel, and on average was 6.6% higher MoM. It is expected that the OPEC and Non-OPEC agreements for supply cuts could be extended until the end of 2018. The big headline in Saudi Arabia was that of women being allowed to drive from June 2018. Labor force participation for the women is expected to increase. This is postive for the retail, banking and transportation sectors. FTSE announced a delay in Saudi Arabia entering the FTSE GEIS Index. FTSE Russell proposes to bring forward the next formal assessment of Saudi Arabia’s classification status to March 2018 when the timing of inclusion will be made. The tone of the announcement was extremely positive. Excess liquidity in the banking system continued to be deployed to buy government bonds (now 10.0% of assets). This continues to contribute to elusive loan growth (just 0.3% MoM). The share of time deposits reached 29.9%. POS transactions were up 11% M-o-M and cash withdrawals from ATMs were up 20% MoM. The government raised USD 12.5bn in the second dollar bond this year and has received 345k bills worth SAR 525bn from the private sector’s contractor entities during FY16/17; 98% of the bills were paid within 60 days. There were reports that the Saudi government is re-drafting the NTP, pushing out some target dates and clarifying responsibilities to facilitate implementation. The reported delay of Saudi Aramco’s IPO were denied by the company. It is expected that the government will raise local gasoline pricing to market levels by November. Corporate activity continued with Savola selling a 2% stake ($0.3bn) in Almarai to institutional investors on September 12, and Credit Agricole selling a 16% stake ($1.5bn) in Banque Saudi Fransi to Kingdom Holding on September 20. Cement sales volumes fell 6.9% YoY in September 2017 and were 15.5% lower MoM. Construction activity is still slow and the sector keeps suffering on account of cuts in government spending on infrastructure. The focus for the near term would be the Q3 results. We expect strong results for the petrochemical sector; results are expected to be stable for banks and negative for the cement sector. The market is expected to remain volatile and range bound in the 6,8007,200 band in the near term. 100%
EFG-Hermes Saudi Arabia Equity Fund
Saudi Fund 0.3% 7.7% -1.9% -3.4% 17.2% 48.8% 11.2% 1.8% 34.5%
TASI1 0.3% 1.0% 4.3% -17.1% -2.4% 25.5% 6.0% -3.1% -25.8%
Fund Characteristics No. of Holdings Weighted Market Cap Dividend Yield* P/E Ratio 17
28 SAR 69.4 billion 3.6% 16.2
*Figure reflects the weighted average yield of a dividend-bearing security in the fund.
Fund Metrics Saudi Fund
Volatility Beta*
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 Dec-16 Mar-17 Jun-17 Sep-17
EFG-Hermes Asset Management Tel: 966 11 293 8048/9 Fax: 966 11 293 8032 [email protected]
22.5% -
*Calculated vs. the Tadawul All Share Index (TASI) since the Fund’s inception
Top Holdings Holding
Al Rajhi Bank Saudi Basic Industries Corp National Commercial Bank
Sector
% Holding
Banks Materials Banks
12.1% 8.9% 6.8%
Fund Information NAV per share Launch Date Management fee Minimum Subscription Subscription/Redemption
SAR 13.4467 June 17, 2008 2% SAR 50,000 Twice Weekly
Allocation by Economic Sector
Retailing 2.0%
Telecommunication Services 2.9%
Transportation 3.4%
Utilities 3.3%
Energy 2.1% Banks 27.9% Capital Goods 2.1% Cash 0.5%
Materials 21.3%
-50%
TASI
22.5% 0.97
Real Estate Management & Development 8.2%
0%
Difference 0.0% 6.7% -6.2% 13.7% 19.6% 23.3% 5.2% 4.9% 60.3%
* MTD figures reflect performance between August 31, 2017 and September 30, 2017 ** Fund’s inception date was June 17, 2008 1 TASI is a price return index
Tadawul All Share Index
50%
-100%
Month to Date* YTD 2016 2015 2014 2013 2012 2011 Inception to Date**
Insurance 8.8%
Fund Indentifiers ISIN Reuters Code Bloomberg Ticker
Consumer Services 2.7% Health Care Equipment & Services 6.1%
Food & Beverages 8.8%
XC000A1W4DX3 LP65122906 EFGSAUD AB
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.
