REUTERS SUMMIT-Mobius to increase Saudi exposure on market open

David French and Dinesh Nair
Reuters Middle East

(For other news from Reuters Middle East Investment Summit,

click on

* Says Saudi market opening will see wave of investment

* Fund manager sees Egypt rallying into 2013

* Mobius says bullish on Dubai's property market

* Says more institutions looking at frontier mkts

* Likes banking, oil and gas, consumer stocks

DUBAI, Nov 19 (Reuters) - Mark Mobius, one of the world's

best-known emerging market investors, will increase his exposure

to Saudi Arabia once the largest Gulf Arab state opens its

markets to foreigners.

Saudi Arabia, the top OPEC producer, has been considering a

wider opening of its market for several years; currently

foreigners have only very limited opportunities to invest

through indirect ownership and exchange traded funds.

"Right now, we don't have much in Saudi Arabia as the

current system opens us up to counterparty risks. Once the

market is fully open, we probably will increase our exposure,

provided all things remain equal," Mobius, executive chairman of

Franklin Templeton's emerging markets group, said in a telephone

interview as part of Reuters' Middle East Investment Summit.

With the Gulf state rolling out a $400 billion

infrastructure programme - the world's biggest stimulus relative

to GDP - foreigners are keen on the Saudi stock market and the

biggest Arab economy. The bourse has risen 5.4 percent

year-to-date, compared with a 6.2-percent rise for MSCI's

emerging market index.

Saudi's opening of its stock market to foreigners will be

gradual, its capital markets regulator has said, although it has

not given a date. Analysts and traders expect the move to come

next year.

Mobius, who helps oversee $48.2 billion in emerging market

funds, expects the opening up of the Saudi exchange to have

wider benefits as the event will drive a wave of foreign

investment into the Middle East.

Saudi Arabia currently ranks sixth in country weightage for

Templeton's $1.1 billion Frontier Markets Fund, lagging behind

Nigeria, Kazakhstan, Vietnam and its Gulf peers, Qatar and

United Arab Emirates.

The fund manager said institutional investors are

increasingly buying into the idea of investing in frontier

markets - regions seen as riskier and less developed than

emerging markets - in the current low interest rate environment

and at a time of low growth in developed markets.

"We now have $2 billion in frontier markets which means that

there is a group out there which is interested in generating

real alpha," he said. The excess return of a fund relative to

the return of the benchmark index is a fund's alpha.

Mobius is bullish on banking, oil and gas, mining and

consumer-related stocks within the frontier space.


Political uprisings in the region during 2011 will have a

positive impact in the long-term, Mobius said.

Governments across the region have announced billions of

dollars worth of projects to boost infrastructure and create

jobs after protests demanding more open political structures and

better standards of living shook several Gulf Arab countries.

"We looked at the Arab spring in a very positive light. We

thought that it was going to open up the markets and lead to an

expansion of the market capitalisation of companies in this

region," Mobius said.

That bet seemed to have paid off with Egypt's benchmark

stock market index rising 51 percent so far this year -

making it among the world's best-performing markets.

Mobius expects the trend to continue as the North African

country's Islamist-dominated government embarks on a plan to

boost the battered economy.

"In an Islamic style of finance, equity is very important. I

think it's going to be very important for them to expand the

stock market further," Mobius said.

Templeton's frontier fund counts Egypt's Orascom Telecom

Holding among its top holdings, with a 3.38 percent

weightage at end-September.

Mobius is also bullish on real estate in Dubai as the

emirate's main sector shows signs of recovery following a

60-percent plunge in prices from its peak in 2008.

"They have a long way to go on the debt issue, but we took a

position in the property area when things were in bad shape

because we believed that this market is going to recover,"

Mobius said.

For a Take-A-Look on the summit, click on

Follow Reuters Summits on Twitter @Reuters_Summits

(Editing by Louise Heavens)

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes