APT RISK INSIGHT: A CLEAR PERSPECTIVE ON RISK AND RETURN IN THE MIDDLE EAST AND NORTH AFRICA (MENA) REGION
As turmoil spreads in the Middle East and North Africa (MENA) region, investors are becoming more concerned about the level of risk of investments in this area. Using SunGard's APT, the factor-based risk solution, to analyse the Kingdom of Saudi Arabia (KSA) and MENA markets, we can provide the following risk analysis to help fund managers easily understand their exposures to risk and the potential to maximise return.
High Volatility: Investing in KSA alone appears riskier than regional investing.
Decoupling: A low correlation suggests risk and return in KSA is not linked to the rest of the region.
Country Risk: Kuwait contributes most to risk for the MENA ex-KSA benchmark. This is the market to to watch.
Sector Risk in MENA ex-KSA: The Financials sector contributes most to risk in the MENA ex-KSA benchmark.
Sector Risk in KSA: The Basic Industries sector contributes most; this difference in sector risk is one reason for the de-coupling.
This analysis suggests that investors need to pay close attention to their holdings in Financials and Basic Industries. If these sectors were to suffer together, the de-coupling which provided diversification could be lost, and the effects on risk could be severe. You can access the detailed reports underlying this analysis from the download area above on the right-hand side.