“Some of the banks, construction companies and real-estate companies, like Emaar, for instance, are where continued value is being created.”
So, where does Seif see Dubai placed at this stage in the economic cycle?
“If you are talking about the big drivers in Dubai, it will be banking activity for mortgages. A large part of the consuming population was from Saudi Arabia and Russia, and these have been coming less. I don’t know accurately to what degree, but real estate and tourism – in terms of shopping – have definitely been affected.
“Real estate prices have not fallen massively, but they are slower. You find the bank positions are intact. It is hard to say exactly where Dubai is in the cycle. You can put together three or four metrics that will give you one side of the story, but you can also source some others, so it is all pretty subjective.”
Living in Dubai, he says the city is growing, and he characterises the economic activity as ‘quite high’. If real estate is not growing in price, it is liquid. New construction is under way and the government is paying contractors on time.
Evolution of Egypt
The portfolio has very little exposure to Qatar, Oman and Bahrain. As for Egypt, the non-oil player, Seif says this is the most populous country in the region and is where most of the consumption and infrastructure growth is happening.
“Egypt is trying to collect and compensate for a massive loss of international reserves. Five years ago, international reserves were almost double what they are today. The currency is under massive pressure, it is almost 30% down from where it was five years ago, before the change of regime.
“Right now, there is a level of uncertainty about Egypt’s future in terms of investment laws and direction. But in terms of decision making, it is going in the right direction. It is trying to set the ground for the attraction of foreign direct investments, which will, I expect, fix a lot of things in terms of employment and economic activity in general.”
Sief cites several sectors in Egypt that are going to benefit from this: construction, consumption driven businesses such as food manufacturing, as well as specifically highlighting an Egyptian company called Eastern Tobacco.
“It is owned mostly by the government, but it is very cheap. To me it offers fantastic value, and it is held by our funds. Its dividend yield is higher than its PE and it’s a monopoly. It is the only seller of cigarettes in a country of 90 million people.”
Turning to the macro picture, a key question is where the oil price is heading, although Seif points out the firm is not macro analysts or strategists.
“Oil is a factor when we model companies, and we project and forecast the future. We try to set a realistic, long-term oil price that is normalised and doesn’t change three times a year. Which is something that could, on average, be the norm over the next two, three or four years.”
