The equity markets in the Middle East and North Africa have borne up well in recent months, despite the troubles in countries like Syria and Egypt, and present some attractive opportunities for savvy investors, according to Baring Asset Management.

The firm notes that the MENA region has significantly outstripped its wider frontier markets cohort this year, with the MSCI Arabian Markets ex-Saudi Arabia Index having posted a 7.3 per cent rise (in US dollar terms) year-to-date, against a 5 per cent rise in the MSCI Frontier Markets Index.

As Ghadir Abu Leil-Cooper, head of EMEA equities at Barings, points out, the lack of comprehensive analyst coverage in the MENA region means that there are plenty of unloved but strongly-performing companies to be found. It should also be remembered, the firm says, that the MENA region is home to a growing number of truly international companies, like the Dubai-based port operator DP World, which are growing in global stature, posting strong results and gaining market share.

Turning to the region’s demographics, the MENA countries are seen as well positioned to deliver strong and sustained growth. Key to the region’s profile is the fact that around a third of its population are under 15 and this bodes well for the long-term demand for housing, health care and consumer goods, Leil-Cooper points out.

Barings is getting exposure to the young consumers investment theme through the financials sector in the main. “Compared to their counterparts in the developed world and other global emerging markets, consumers are underleveraged and we believe regional banks have the potential to rapidly increase their services in areas such as personal banking, mortgages and insurance products,” said Leil-Cooper.

The MENA region’s resource-rich economies continue to benefit from raised oil prices, so countries like Qatar and South Africa are pumping money into infrastructure development. As such, Barings is positioning itself to reap the rewards of increased investments into projects like new hospitals, airports and desalination and electricity plants.

Barings is however realistic about the MENA region’s instability, expecting political tensions to remain elevated in certain countries over the short term. 

“However, the investment case remains attractive and we shall continue to view any periods of volatility as an opportunity to acquire companies with good long-term growth prospects at reasonable valuations,” said Leil-Cooper.