GCC equities in Bank Sarasin's 'Top-10' 2009 investments

Bank Sarasin has recommended Gulf States' equities as one of its 10 key investment themes in 2009.

The Swiss private bank’s Chief Investment Officer, Burkhard Varnholt expressed confidence about the Gulf states and hailed UAE's $10bn bond move as a 'highly welcome' step. This "only serves to solidify the fundamental investment case for the Gulf States," he said in a company press release.

Varnholt feels the Gulf States are resilient due to the following factors:

• They currently offer the cheapest valuations in seven years;
• They are generally well-managed, family-run companies;
• They have solid corporate balance sheets; and
• They are fundamentally attractive because of their resource wealth.

The bank’s CIO sees $80 a barrel as a sustainable level for oil in the long term. “Oil prices at $30-40 a barrel are not sustainable. I think $80 a barrel is sustainable over the long term, but we probably won't see that in 2009. I expect the price to easily reach $80 or more in 2010", he said.

"The recovery in demand will support a price rise, but also supply bottlenecks, due to an inadequate investment in exploration equipment and maintenance, for example. But in the short term, as net exporters of oil and gas, the Gulf States will continue to make money. They are still break-even, even at $35 per barrel. This is not the case in Venezuela or Russia".

Sarasin has recently launched the Sarasin GCC Equity Opportunities Fund. The Fund offers exposure to Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates.

Varnhold feels that asset allocation holds the key for investment performance in 2009. The current crisis is creating "once-in-a-generation" opportunities for investors, encouraging them to be both open-minded and contrarian, he said in the press note.

Investors need to scrutinize the long-term sustainability of business models in order to assess risk, Varnhold suggested. A thematic allocation process, which provided important protection, even if limited, from a globalized, interdependent economy in 2008, should also be adopted in 2009, he added.

To hedge against the possibility of policy and economic failures, Sarasin recommends investing a 10% portfolio allocation in gold, which may also serve as hedge against the next wave of reflation and the potential devaluation of the US Dollar.

Varnholt has outlined 10 investments which he believes will be positive for investors in 2009.

These include Chinese A-shares, Gulf States' equities, selected sustainable water companies (i.e. desalination, metering, treatment, irrigation etc.), rare materials such as tantalum and platinum, wheat, grain, corn and fertilizer companies, Norwegian and Swedish Kronas, the Pound Sterling, Asian currencies (except the Hong Kong Dollar), selected convertible bonds, sustainable real estate developers and selected renewable energy companies.

READERS' COMMENTS

MORE FROM ARABIANBUSINESS.COM