Outlook: Investors may find value in select equities despite higher valuations | ZAWYA MENA Edition

Outlook: Investors may find value in select equities despite higher valuations | ZAWYA MENA Edition

AD Investment Management (ADIM) said it sees opportunity for MENA investors to selectively find value in equities, despite the spike in valuations after the initial shock of COVID-19.

The Middle East-focused asset management boutique sponsored by Invest AD, said with fiscal stimulus and deficit spending to remain integral -- coupled with yield curve control and vaccine rollouts accelerating the evolution of a ‘new normal’-- the investment landscape in 2021 may reflect a continuation of the reflation/momentum trade, albeit at increased volatility.

There is also potential to position portfolios for recoveries in stocks depressed by years of unfortunate cycle timing, ADIM said in its Annual Outlook Letter for 2021.

Investors need to pick stocks with relatively attractive valuations that can help to normalize in returns within a period of time order to mitigate the risk of increasing interest rates disrupting the surge in equities, it said.

“Markets in aggregate seem to be currently priced to beyond perfection, where a lot needs to go right on the path to projected growth for them to justify their valuations,” said ADIM’s Annual Outlook Letter. “Even then, they are not offering the kind of returns one would hope for over the next decade from where we are today.”