MENA likely to outperform emerging markets in 2017: Survey

Despite the current economic challenges, investors appear to be very optimistic about the future of Egypt with 46 percent of the participants of the survey expecting Egypt to be the top-performing market in USD terms in 2017. (Reuters)
Updated 12 March 2017
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MENA likely to outperform emerging markets in 2017: Survey

JEDDAH: Markets in the Middle East and North Africa (MENA) are likely to outperform emerging markets (EM) in 2017 but political instability continues to be seen as the main source of risk for regional growth, according to the results of a survey conducted by EFG Hermes.
The EFG Hermes’ research team recently polled 510 international fund managers and institutional investors from 260 institutions and 147 leading companies from MENA and frontier market on the outlook for the markets.
The survey found that around 42 percent of the investors saw higher trade barriers as the key risk to global markets in 2017.
Despite the current economic challenges, investors appear to be very optimistic about the future of Egypt with 46 percent of the participants of the survey expecting Egypt to be the top-performing market in USD terms in 2017.
Within MENA sectors, most investors continue to see health care as the one with greatest performance potential in 2017. The survey results show that investors expect MENA earnings to rise by 10 percent in 2017.
Despite a consensus view on lower oil prices for longer, most participants believed that the Gulf Cooperation Council (GCC) pegs would not change by 2020.
Most of the investors who took part in the researchexpect that the US Fed will hike rates twice this year, but there was no view on whether or not EM funds will see net outflows in 2017 with votes split equally among the “yes and no” answers.
However, 77 percent of the participants said that passively managed funds would continue to grow at the expense of active assets under management (AUMs). Moreover, despite big frontier markets (such as Pakistan, Qatar and the UAE) leaving the frontier index in recent years, 68 percent of the participants believed that the frontier will continue to be a standalone offering, which is good news for Kuwait which most participants believe will remain a frontier market by 2020.


Turkish lira hits record low, down 20 pct against dollar this year

Updated 2 min 20 sec ago
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Turkish lira hits record low, down 20 pct against dollar this year

ISTANBUL: The Turkish lira tumbled more than 5 percent on Wednesday before recovering some ground, the latest drop in a sell-off that reflects growing investor alarm over the direction of monetary policy under President Tayyip Erdogan.
The decline, exacerbated by stop-loss selling by Japanese retail investors overnight, brings the lira’s losses to more than 20 percent so far this year and puts it on track for its worst monthly performance since the 2008 financial crisis.
The sell-off has also increased expectations that the central bank may be forced to call an extraordinary meeting to raise interest rates before its next scheduled policy-setting meeting on June 7, as it has done in previous years.
“We expect the MPC to hold an interim meeting over the coming days to raise interest rates by at least 200bp,” Jason Tuvey of Capital Economics said in a note to clients.
“If policymakers refrain from tightening monetary policy, the risk of a disorderly adjustment and a sharp economic downturn (possibly recession) will mount.”
The lira was at 4.8500 at 0855 GMT from its close of 4.6746 on Tuesday. It earlier touched a record low of 4.9290. It also fell against the Japanese yen, amid talk Japanese retail investors were selling the lira as it hit stop-loss levels.
“We are bearish on the lira and always have been given its very weak external balances and with macroeconomic policy moving in the wrong direction as well,” said Kiran Kowshik, emerging markets forex strategist at UniCredit.
A self-described “enemy of interest rates,” Erdogan wants borrowing costs lowered to spur credit growth and construction, and he said last week he would seek greater control over monetary policy after elections set for June 24.
Economy officials told Reuters the government’s economic management team met at the start of this week to discuss potential measures, including possible steps by the central bank. Deputy Prime Minister Mehmet Simsek and Central Bank Governor Murat Cetinkaya attended the meeting.
Ratings agencies sounded alarm about monetary policy. S&P Global senior sovereign analyst Frank Gill told Reuters government finances could deteriorate rapidly if authorities failed to stem pressure on the currency and government borrowing costs .
Investors want to see decisive rate increases to rein in double-digit inflation, and Erdogan’s comments have reinforced long-standing worries about the central bank’s ability to do that.
Borsa Istanbul Group, the Istanbul stock exchange company, said in a statement on Wednesday it had converted its foreign currency assets into lira, aside from its short-term needs, in a step to support the Turkish currency.
The lira’s weakness was exacerbated by dollar gains against a basket of currencies, with investors awaiting the minutes of the Federal Reserve’s last policy meeting for hints on the pace of monetary tightening.
The yield on the benchmark 10-year bond rose to 15.30 percent at the opening from a last trade of 14.92 percent on Tuesday.
The main BIST 100 share index fell 0.22 percent to 103,105 points on Tuesday.