Bank Sarasin's new Dubai unit will launch two equity funds worth up to $1 billion to target Gulf and Middle East stocks which it believes are undervalued, an executive said on Tuesday.

Chief investment officer Burkhard Varnholt said the Swiss bank will launch one fund, managed by its new firm Sarasin-Alpen & Partners, to focus on Gulf markets, targeting property and bank stocks as well as commodities shares.

"We are firm believers in the fundamental drivers of the GCC economy and now, with the world economy and global financial markets having been hit by the banking crisis, it has become even more attractive," he told Reuters in an interview.

The Gulf fund would focus on "well-established, high-quality stocks," Varnholt said, some of which he believes are discounted between 15 and 25 percent versus comparable peers in US or European stock markets.

"We find those discounts excessive," he said.

The Gulf property and banking sectors have suffered some of the sharpest losses in the region as the full force of the global financial crisis hit local stock markets in recent months.

Shares in Dubai's Emaar Properties have lost nearly 70 percent of their value since the beginning of the year, while Emirates NBD, the Gulf's largest bank by assets, has plummeted more than 60 percent.

"Our view is that we are very near the darkest hour in financial markets, globally speaking, and when we look to 2009 we believe equities and commodities may be two asset classes which will end the year with a positive rather than a negative sign," Varnholt said.

The second fund, to be launched six weeks after the first, would target Middle East and North African bourses, the bank said. It did not want to be specific about target sectors until closer to the launch.

Together the funds aim to raise between $500 million and $1 billion, the bank said, and would target mainly foreign investors. - Reuters