Fairtree Market Insights with Karena Naidu | Episode 9

Hello everyone, and welcome back to Market Insights, a series where we delve into interesting topics affecting equity markets. Today I have Jacques joining me. Thank you for being here Jacques. So let’s kick off. So we’ve seen India underperform global markets over the last year. Could you spend some time unpacking those drivers and maybe give us some insights into Fairtree’s positioning?

So the Indian market is undergoing one of the biggest relative underperformances over a one year period relative to global markets and part of this has been driven by geopolitical tensions and tariff uncertainties with the US but also the market’s been coming off quite a rich valuation relative to its own history, but also global markets, where the Indian market was trading north of a 24 PE at the beginning of the year, and that’s derated to a 21 forward now while the emerging market index has gone from a below 12 forward to a 13.6 forward price to earnings basis at the moment. The long term prospects for the Indian market do remain very attractive, and we’ve used this underperformance to decrease our underweight by 6% relative to the beginning of the year, and we continue to look for opportunities in the Indian market at attractive valuations.

So on the converse, we’ve seen some really strong performance coming out of the Saudi Arabian market over the last few weeks. Could you maybe give us some insights on the drivers in that market?

So the Saudi Arabian market has actually been one of the weakest markets year to date in terms of dollars being down close to 8.6% at it’s trough and that’s all been reversed now as one of the board members of the Capital Markets Authority announced that foreign ownership limits might be lifted by the end of the year. The current foreign ownership limit is around 49%. So if that is lifted, similar to what we saw in the UAE, it could mean that these big passive inflows into that market, that’ll driver rerating.

And Saudi Arabia’s weighting in the index will also increase. We’ve already seen some of that come through in Saudi’s weighting in the index is now 3.1% having overtaken South Africa at 2.4%. And with this additional flows, that market will continue to grow in the index and in importance. Saudi Arabia does remain one of the most underweight markets for investors. However, we are quite constructive about the long term outlook for Saudi Arabia and this is reflected in our overweight positioning in the emerging market fund.

Brilliant. Thank you to the audience. Thank you again for tuning in and we look forward to seeing you next time. Thanks so much.