Investing in the Middle East and Africa presents a unique opportunity to tap into robust economies like Saudi Arabia, the United Arab Emirates, and Qatar. Additionally, it provides a means to broaden their equity portfolios beyond the traditional preferences for Western economies.
According to the International Monetary Fund, the MEA region is sure to show impressive GDP growth. It forecasts a 6% for the Middle East and 4% for Africa. A stark contrast to the modest 1% shown for so-called ‘advanced’ economies.
Furthermore, investors in this region have been reaping the benefits of their investments. This is seen clearly by the remarkable returns generated by the top-performing funds over the past five years. It is essential to examine the investment options available for those seeking to expand their exposure to this dynamic region. But first, let’s assess the performance of the sector.
The MEA region encompasses a diverse array of countries. That includes the high-growth economies of Saudi Arabia, Qatar, the UAE, and Iraq. Also present are the comparatively slower-growing nations like South Africa, Sudan, and Malawi. Nonetheless, the primary focus of investment opportunities tends to revolve around South Africa and the Middle East.
At the forefront of this investment landscape stands Kuwait. The MSCI country index surged by almost 70% over the aforementioned period. Following closely are Saudi Arabia and the United Arab Emirates (UAE) with remarkable gains of 44% and 32%, respectively. Matthias Siller, co-manager of the Barings Emerging EMEA Opportunities investment trust, underscores the strengths of these economies. He highlighted that they maintain a lower inflation rate than other countries due to relying on hydrocarbon-based industries. This economic stability has successfully protected them from the challenges experienced by the eurozone and the global market. It also enables them to support their consumers while diversifying their economies for long-term sustainability.
Conversely, South Africa’s performance over the past five years has been marked by a mixed record, ending the period with a decline of over 15%. As Mr. Siller notes, South Africa’s challenges have emanated from a confluence of factors. These factors include political disruptions, electrical power shortages, and the disruptions brought about by the COVID-19 pandemic.
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