The Saudi market continued to be the worst performing stock market in the region, and this month it was followed by the Qatari Market, both declining during the month by 7.5% and 5%, respectively. Declining oil prices, negative news flow from the Saudi construction sector and harsh austerity measures in Saudi Arabia had a negative impact on the path of GCC markets. But by end of the month a positive surprise occurred in Algeria about OPEC’s promise to cut production for the first time since 2008.

For Al Hayer Fund, we have continued increasing the cash allocation to about 13% as markets continued its decline. We have also reduced exposure to the Financials sector to about 39% from about 47%, since the sector, especially in Saudi Arabia, will be the hardest hit in the event of increased defaults in the system. While at the same time, we have diversified into consumer staples, chemicals and telecom, taking a defensive stance in anticipation of a dismal 3Q results.

Despite the heavy losses the Saudi market has exhibited this year, we believe that over the next few months it will recoup 2016 losses, as clarity increases on government measures and stability of oil prices in the range of $45-55 per barrel.