Derayah Financial, the first and only independent financial company in the Middle East to present all investment alternatives to individual investors under one roof, has issued its quarterly report, "Derayah’s Direction" for year-end 2009. The report explores the performance of different asset classes, and analyzes the investment directions in different world markets.
This issue of Derayah’s Direction sheds light on the performance of investment markets in the fourth quarter of 2009, and the suitable allocations of assets for different classes of investors. The report also includes Derayah's recommendations regarding the tactical allocation of assets.
The report emphasized that GCC markets are currently trading above their long-term average P/E (Price to Earnings) multiples which the report considers a possible limit to the market potential for upside.
The report states: "Current P/E for Tadawul Index (TASI) is also above long-term averages. Therefore, we maintain a neutral stance regarding GCC markets".
On the other hand, Derayah Financial predicts oil prices to move upwards due to the depreciation in USD, which will leads to increasing cash flows to the region. The report also anticipates that increased budget outlay in larger economies, such as Saudi Arabia, will add to the momentum of economic activity in the region, partially shielding it from global downturns.
The report states that emerging equities continued their excellent performance in Q4 2009, and that Brazil, China and India have provided the highest returns in 2009. The report adds that over long time horizon, emerging equities have provided good returns to investors.
In its quarterly report, Derayah recommends a neutral stance regarding developed equities which includes American, European, and developed Asian markets. For the American markets, the report recommends moderately overweight stance since the larger US companies have managed to accumulate strong cash balances and there are expectations of stronger profitability in the coming quarters.
For the European markets, the report recommends a moderately underweight stance because the withdrawal of the stimulus plans will strongly impact the growth in the region. The report recommends the same for the developed Asian markets because the appreciation of the Yen will hamper the economic growth of Japan.
Commenting on this report, Mohamed El-Kewaiz, Derayah Managing Director, said: "tactical allocation of assets recommends that investors modify their long-term asset allocation to take advantage of the opportunities that arise from temporary dislocations in various markets to generate higher returns". He also expressed his hopes that the report "will contribute to the investment community by offering a continued flow of detailed and specialized information".
El-Kuwaiz stated that Derayah has an advanced framework for portfolio structuring and tactical asset allocation for different portfolios. The company developed a custom mathematical program to assess the various investment classes in the different markets and to calculate the most efficient portfolio structures that would generate the highest returns within the specified risk levels.
He added: "For every risk level, we design a custom portfolio that generates the highest possible expected returns, based on historic and expected future performance of these asset classes. Derayah collects and integrates investment and economic analyst expectations for the future performance of various asset classes and markets from a selected set of global asset management firms. In addition to that, the company also has its own assessment system for every investment class. This system is based on analyst expectations and is used to determine the most suitable tactical shifts in every investment class for the different portfolios.
