NCB Capital launches mid-cap equity fund.
RIYADH: NCB Capital, the investment arm of the National Commercial Bank has launched the Al-Ahli Saudi Mid-Cap Equity Fund yesterday to attract both Saudi and non-Saudi investors.
"The term mid-cap defines those companies with a market capitalization between SR3 billion to SR50 billion, compared to small-cap companies with a capital below SR3 billion and large-cap companies, which are capitalized above SR50 billion," Hasan Al-Jabri, head of investment banking at NCB Capital, told reporters.
"In our continuous search to look for more for our clients, we have identified those mid-cap companies that have the potential to perform better than the broader market," he added.
"Al-Ahli Saudi Mid-Cap Equity Fund offers investors the opportunity to benefit from the strong performance of mid-caps," Al-Jabri said, adding that in the Kingdom's thriving economic climate, medium-size companies are expanding in size and delivering better than average profitability, making mid caps a highly attractive opportunity for investors to share in this time of increasing prosperity.
Furthermore, he pointed out that confidence levels in the local market are gaining momentum as investors regain trust and are more eager to invest in local funds. "This is particularly true among people who know and live the local market to a much bigger extent than they do with the global markets," Al-Jabri commented.
Al-Ahli Saudi Mid-Cap Equity Fund is an open-ended Shariah-compliant fund with a minimum subscription of SR5,000. It provides investors with the opportunity to gain exposure to a wider range of Saudi equities.
"The fund aims to maximize its returns by investing primarily in mid-cap companies and selectively in small-cap companies with relatively higher growth potential compared to the broad market," said Ayman Bajsair, head of product development at NCB Capital. The fund offers the benefits of long-term capital growth and risk-reduction through asset allocation, sector diversification and stock selection.
NCB Capital is benchmarking the Al-Ahli Saudi Mid-Cap Equity Fund against Standard and Poor's Saudi Mid-Cap Shariah Compliant Index (with market cap of SR3 billion-SR50 billion).
By the end of 2007, there were more than 80 mid-cap and small-cap companies listed in the Saudi market with total market capitalization of SR440 billion, which accounted for more than 70 percent of the total number of companies listed and about 40 percent of the total market capitalization for the overall Shariah-compliant stock universe.
The banking sector in particular has witnessed tremendous growth in recent years and banks, which started as mid-cap companies four years ago, have grown into large-cap companies. Similar success stories exist in other sectors such as industrials, petrochemicals and telecom.
"With a long list of initial public offerings (IPO's) coming up this year and beyond, the number of mid caps will increase significantly and it is worth noting that many of the IPO's during the past five years were mid-cap companies that have outperformed the market since going public," Bajsair explained.
"Looking ahead, soaring oil prices, increased government spending, improved regulation and ample liquidity growth are factors that are underpinning renewed confidence in the Saudi stock market, which closed 2007 showing a gain of 41 percent and has the potential to grow even more. In this environment, the Al-Ahli Saudi Mid-Cap Equity Fund is a compelling proposition for investors who are seeking to benefit from the huge potential of the thriving mid cap investment category. "
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