Morgan Stanley likes Saudi, Nigeria and Kuwait. At least that is what their research
is saying. We love the sound of it as those markets happen to be some of our
darlings as well.

Those who have been reading our weekly updates for a while have had to put up with
us shouting it out from the rooftops that these markets are very much undervalued.
It was more like a cry in the dark when the crisis was in full swing and it took
some patience, but it has paid off and most of these markets have been outperforming
since the beginning of this year. Now that the big players are also making the case,
we may be in for some real good times!

It is given that the case for Saudi is pretty obvious for the MENA 'insider'(now),
but we must do an extra effort to catch the attention of the Europeans as many still
can't seem to distinguish between the Dubai-related headlines and  the vast
opportunities in the wider MENA region.  There still is a sort of fear driven
emotional blockage at play and it is blinding the eye of seeing the value.

It is quite amazing how Dubai, with only around 5% of the regional GDP, can act as
such a mighty proxy for the region. It says much about Dubai's PR efforts and how it
has stuck a big marker on the map of the world's audience. Perception is everything
and that is the part they managed to conquer, but where was this amazing PR machine
during the heat of the debt crisis anyway?

I guess, again,  the same thing as always will occur: the market will continue to
rise and along with it will the courage of the international investors who will
eventually return. They are very welcome, the local investors are waiting for them.

What is increasingly clear is that the 'MENA insiders' have already moved on, there
is proof of this in the divergence in performance between the regional GCC markets,
even the Abu Dhabi and Dubai markets now seem to be on different tacks.

I thought it might be a good opportunity to provide you with an update of the graph
below. It illustrates that some of the main markets of our focus are still trading
at around only 30% of their 5 year highs. If you put this in contrast with the major
upside the major emerging markets have achieved over the past year, it becomes very
clear that these markets need to catch up.

Thinking conservatively: even if such a 'catch-up move' would bring markets to only
half of the value of the 5 year high, in some cases, we would still be looking at an
appreciation of more than 50%!

[cid:image004.png@01CAB534.7E3B1AD0]

With regards to Silk Invest's portfolios, the current asset allocation is mainly
positioned to capture the upside from the above mentioned 'catch-up' expected in
these undervalued markets.

With regards to the markets that have performed well so far, we are going to be
taking on a more tactical approach. For example, Egypt has been one of the best
performing markets in the past few months and has strongly contributed to our
portfolios performance. At these levels, we feel that playing close to the ball
makes more sense as the market consolidates.

We are increasingly positive on Kuwait, but are aware that the local investor base
is sceptical and negatively biased due to sentiment of impasse in their political
system. Many local investors in Kuwait are also suspicious of Zain's sale of it
African mobile telecom assets. They fear the deal may wind up being cancelled again.
However, the more we look at Zain's transaction, the more we see it as a positive
for both sides as Bharti, the Indian buyer, has proven to be very eager to enter the
African mobile market and for Zain, it is a needed opportunity to crystallize a
profit and reduce its debt outstanding.

With regards to Sub-Saharan Africa, our largest allocations to Nigeria, South Africa
and Kenya continue to power the fund. As always, despite the fact that we like Ghana
and Botswana, its shallow market liquidity limits our exposure.

The African theme seems to be gaining traction. Maybe it is the advent of the World
Cup in South Africa or the realization that things have really changed down there
but more and more investors in Europe are focusing on Africa and our Lions fund has
been getting an increasingly steady stream of inflows.

This week I also wanted to feature a story form Morocco's Addoha, who announced that
they will be building 25.000 social housing units a year for the next four years. In
addition, these units will provide a tax break for their buyers. As a result,
Addoha's main office in Casablanca was stormed by thousands of potential buyers to
the extent that police forces had to be called in to organize the crowd.  More than
15.000 units were promised after the first few hours of the sale!

Below is an picture taken from 'La Nouvelle Tribune', the daily Moroccan newspaper.
Does the saying "if you build it, they will come" sound familiar?

[cid:image006.jpg@01CAB534.7E3B1AD0]


What is in this week's updates?

Our weekly updates are attached or can be found on our website on
http://www.silkinvest.com/#/50-ProductsUpdates

Here are some of the headlines of the stories we put in perspective this week:


*         Egypt could grow at 5.5% in 2010 with big plans to double its exports

*         Nigeria continues to rise amid after a smooth transition of power

*         Botswana explores ways of increasing it market liquidity

*         Morocco received further backing by the IMF for its reform and
modernization program

*         Ghana makes progress in taming the Cedi's inflation rate

*         Expectations for higher earnings accross the Maghreb markets

*         Saudi companies continue with regional expansion

*         Saudi Arabia and Oman get a credit rating upgrade while Botswana is
downgraded.

*         Kuwait continues its rebound, mostly on the back of Zain.

*         The IMF praises Qatar's macroeconomic efforts

*         Reduced activity in global frontier debt markets provides opportunities to
invest in local currency debt issues.

Company news

*         Air Arabia post lower earnings but beats all estimates

*         Higher earnings for East African Breweries, Guinness Nigeria.

*         Regional expansion plans for Illovo Sugar (South Africa), El Sewedy Cables
(Egypt), CMT (Morocco)

*         Strong earnings surprise by Attijariwafa Bank (Morocco)

*         Ahli United Bank (Bahrain) obtains approval to acquire 40% of Libya's Bank
for Commerce and Investment

*         Dubai's Drake and scull's net profit rose by 32% despite problems in the
construction sector

*         Kuwait's Zain telecom expects to make returns of up to five billion
dollars from selling its operations in Africa to India's Bharti Airtel for 10.7
billion dollars

*         DP World announced that it is expected to complete the first phase of the
$650mn Vallarpadam port terminal project in Kochi, India by June this year with
operations projected to start by year end.

We look forward to keeping you updated
Kind regards from the Silk Invest Team

For an archive of our past updates, please visit
www.silkinvest.blogspot.com<http://www.silkinvest.blogspot.com>


Baldwin Berges
Managing Director

Silk Invest Limited
4 Lombard Street - London EC3V 9HD - United Kingdom -
+44 7772 460768
www.silkinvest.com<http://www.silkinvest.com/>

Visit the "Silk Invest Updates" blog:
http://silkinvest.blogspot.com<http://silkinvest.blogspot.com/>