RIYADH, 17 September — With the international markets in turmoil following the terrorist attacks in the US, the mutual funds floated by the Saudi commercial banks will feel the impact of escalating pressure in the coming days.
The value of the Saudi mutual funds has been placed at SR42 billion, of which SR10 billion was invested in the US market.
An analyst at the Riyadh-based Consulting Center for Finance and Investment told Arab News that the international equity funds, which have exposure to the US and European markets, will face heavy redemption pressure in the short term. This could have an adverse impact on the Saudi mutual funds market.
“The funds are likely to be parked in the money market or bond funds, where the level of capital protection is high. Some of the funds will also be channeled into the local stock market and local funds, which have yielded more than ten percent for this year so far. The downturn is limited in the medium term.”
The analyst said that in the event of the likelihood of war, the short-term outlook seems bad, but in the long term, when normalcy returns, the economy will benefit from the impact of oil revenues.
He said the Saudi mutual funds started trailing long before the terrorist attacks as a result of the economic slowdown in the US. The National Commercial Bank’s Al-Ahli Europe Equity was trailing even last month, down by 18.77 percent YTD.
The mutual funds of other banks, according to the CCFI Mutual Funds database, also suffered a setback with Riyad Bank’s Riyadh Equity Fund-1 down by 17.43 percent in terms of its Japanese stock portfolio. Other trailing funds were: Saudi American Bank (North American Equity Fund (-22.67 percent); Al-Rajhi Egypt Equity Fund (-32 percent); Saudi Hollandi Bank (Japan Equity Fund -27.26 percent); Saudi French Bank (Japan Equity Fund -22.83 percent; The Saudi British Bank (Japanese Equity Index Fund -32.38 percent); Arab National Bank (Arab Investor Crescent ,- 20.01 percent); Bank Al Jazira (Almashareq Japanese Equities -25.37 percent).
Nevertheless, the analyst pointed out, the National Commercial Bank’s Al-Ahli Saudi Trading Equity was the top performer with an yield of 28.05 percent YTD. Other leading funds were: Riyad Bank’s Riyad Equity Fund-1 (23.03 percent ); Saudi American Bank (Al Musahem Fund (19.85 percent).
The other leading funds were: Al-Rajhi Local Share Fund (40.48 percent); Saudi Hollandi Bank (Investment and Morabaha Fund 22.50 percent); Saudi French Bank (Isththmar 20.53 percent); The Saudi British Bank (Saudi Equity Fund-1 32.71 percent); Arab National Bank (Al-Arabi Saudi Company shares 17.79 percent); Bank Al Jazira (Al-Taiyebat Saudi Equities Fund 12.68 percent).
As for the international funds, the analyst said the financial markets in the US were expected to bear the brunt when the bourse reopens for trading today. “Markets across the world have lost heavily due to the economic slowdown being witnessed for the last three quarters to a large extent .”
He pointed out that the impact of terrorism could induce an interest rate cut by the Federal Reserve Board in the near future. The oil prices were expected to remain high in the short term due to the normal seasonal effect as well as the impact of the impending war. Business confidence will be at a low ebb in the short term, while consumer confidence will also sag in the US affecting business prospects elsewhere, he added.
