Securities and Investment Company (Sico), licensed by the Central Bank of Bahrain as a conventional wholesale bank, said that all its Bahrain-domiciled equity funds have posted impressive returns so far this year, comfortably outperforming the market and competition.

Sico’s flagship Khaleej Equity Fund, which invests in GCC-listed equities, achieved a return of over 16 per cent during the first four months of 2015 while the Gulf Equity Fund, which invests in GCC-listed equities outside of Saudi Arabia, was up over 11 per cent during the same period, said a report in the Gulf Daily News (GDN), our sister publication.

The Sico Kingdom Equity Fund, which invests in Saudi-listed equities, was the top performing Sico fund, having increased by 20 per cent at the end of April.

Sico also reported that total assets under management during this period grew by over 10 per cent to $1.1 billion from $980 million at the end of December 2014, as a result of new mandates received from regional institutional investors.

"The performance of the funds was driven by our stock picking strategy," chief executive Najla Al Shirawi said.

"This strong performance has vindicated our strategy to increase exposure in Saudi Arabia and the UAE at the beginning of the year due to their attractive valuations, despite the prevailing geopolitical concerns and worries over low oil prices.

"We are optimistic about the long-term prospects of regional markets, and our funds continue to be invested in the consumer, financial and petrochemical sectors.

"Contrary to consensus opinion, Sico expects the price of oil to trend up over the next two years," she added.

"This should help realise further upside potential for stocks, particularly in the petrochemical sector.

"In the long-term, banks should benefit from the potential rise in US interest rates and increased government borrowing," she said.

"Exposure to the consumer sector is motivated by its future earnings growth prospects due to favourable demographics in the region and prevailing low commodity prices," she added.

"Sico is known for its stock-picking skills, focusing on the long-term potential of underlying investments rather than adopting a short-term, momentum-driven investment approach," head of asset management Shakeel Sarwar said.

This strategy has served our clients well in the medium to longer term, he pointed out.

"For example, over the past 10 years, the Khaleej Equity Fund has produced a return of around 100 per cent for its investors, despite the fact that the overall market declined by more than 25pc during the same period," he added.

Sarwar said that the economies of Bahrain and Oman will be impacted more from lower oil prices due to their higher budget break-even levels.

"Having said this, these countries are relatively more diversified and open economies relative to their larger Gulf neighbours and hence more resilient to oil price shocks.

"On the positive side, low oil prices should provide further impetus to the governments to accelerate economic diversification and reforms, which could be encouraging for sustainable long term economic development," he added.

Sico has a favourable view on the Saudi market despite its recent run up in anticipation of the market opening up to the foreign investors.

Although retail investors may be overestimating the amount of foreign funds that will flow into the Saudi market in the short-term, given the sheer size of this market, SICO expects the international exposure to attract significant foreign inflows to the region as a whole in the long-term.

Sarwar considers that the Dubai authorities have done a commendable job of transforming the economy since the 2008 financial crisis.

"For example, over the past six years, Dubai has managed to reduce its reliance on pure real estate development by increasing the contribution from consumer spending and tourism to GDP.

"In addition, the new commercial companies' law is expected to encourage many family businesses to list, and hence improve the depth and composition of the stock market."

Sico is cautiously optimistic on the prospects of the Qatar stock exchange.

"Although we have short-term concerns on the earnings outlook of the banking sector, the companies in consumer, healthcare, retail and infrastructure are good long-term plays on the growth in the Qatari economy and continuous infrastructure spending."

Sarwar said that Kuwait stock exchange has underperformed its regional peers for the past many years mainly because of political issues which in turn have impacted government spending and reforms.

"As a result, the valuations of the Kuwaiti market have started looking attractive versus its regional peers."

Any positive movement on the political and economic front could act as a major catalyst for the re-rating of the Kuwaiti market, he asserted. - TradeArabia News Service