Cheyne Capital’s hedge fund for Europe, the Middle East, and Africa is significantly increasing its investment in the United Arab Emirates, viewing it as the most resilient equity market amid uncertainties linked to US President Donald Trump’s policies. Fund manager Carl Tohme highlighted that the UAE’s currency peg to the dollar plays a crucial role in preserving local equity gains, a level of certainty that is often missing in other emerging markets susceptible to sudden currency fluctuations.

In 2024, the Cheyne EMEA Fund delivered a remarkable 13.1% return for investors, significantly outpacing the MSCI Inc. benchmark for the region, which recorded half that gain. This success was largely attributed to a $73 billion stock market rally driven by the UAE’s robust economic growth and strong government support for local businesses. Notable contributors to this growth included Salik Co., whose shares surged by 74%, and Emaar Properties, which saw a 62% increase in share value.

Tohme emphasized the appeal of the UAE’s economic stability, citing a debt-to-gross domestic product ratio below 30% and the advantages of having a dollar-pegged currency in a volatile global landscape. He stated, “In an environment filled with uncertainty, having a currency pegged to the dollar with the debt-to-gross domestic product ratio below 30% offers an exposure that is very appealing from a risk-reward perspective.” He also pointed out that the firm is looking to enhance its investments in Saudi Arabia, particularly in companies aligned with the government’s Vision 2030 strategy, which includes sectors like entertainment, technology, and infrastructure.

The Saudi benchmark Tadawul All-Share Index ended 2024 relatively stable, even as its largest company, Saudi Aramco, experienced a 15% decline. Tohme noted that short-term market negativity presents an opportunity to invest in secular sectors at more favorable prices. Additionally, Cheyne Capital is exploring opportunities in Turkey, where it has benefited from bank stocks and local bonds, anticipating a continued shift towards orthodox monetary policies to combat inflation.

Tohme concluded that while local bonds remain attractive, the firm plans to shift its focus towards equities as interest rates and inflation decrease. He expressed optimism about the potential for stronger returns in the equity market compared to bonds in the near future.