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Mispriced Risk? Investing in the Middle East

The Emerging View

29 April 2014

There was no shortage of concerns about Emerging Markets (EM) last year. Investors fretted about the tapering of the US Fed’s quantitative easing programme, China’s growth outlook, tension escalated in Syria, and both Turkey and Egypt faced social and often violent unrest. Global Emerging Markets investors read the news and increasingly diverted their funds to the developed markets, leaving EM stocks to post a dismal -2.6% return for the year. But investors in Middle East equities apparently missed the memo. There, markets delivered a whopping 30.6% (MSCI GCC USD Net), outpacing developed and Emerging Markets by a wide margin. Why? How? This note aims to explain the investment landscape in the Middle East and also address some misconceptions about risk in the region.

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