Arab Spring made diamond prices sparkle: fund manager

Wealthy individuals in the Middle East shifted money and assets away from the region to safe havens elsewhere, sometimes in the form of diamonds

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    A pink diamond ring weighing 10.99 carats is held by a model during a Sotheby's auction press preview on May 11, 2011, in Geneva, Switzerland. The Arab Spring boosted the price of diamonds as Middle Eastern individuals sent wealth out of the region.
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By Catherine Boyle, CNBC.com

The Arab Spring helped boost diamond prices as the region's wealthy individuals moved their cash from stocks and bonds to safe haven investments and tangible assets, a London-based fund manager told CNBC Tuesday.

"There's no other way that you can shift millions of dollars around the world in the palm of your hand and I have no doubt that the trouble in the Middle East was causing people to repatriate wealth out of that area," said George Godber, fund manager at Matterley Asset Management.

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The Arab Spring has also helped to push up the price of oil in recent months as Libyan supplies halted and investors feared more trouble in the region.

High-end London property prices, which have been much more resilient than elsewhere in the country during the recession, were also boosted by Middle Eastern investors looking for "real assets" and "transportable wealth", according to Godber.

He added that the UK has a "two-speed housing market" at the moment, citing the performance of Galliford Try, the South England-focused construction company in which Matterley holds shares, against housebuilder Persimmon. The housebuilder said on Tuesday that its average selling price had fallen to 162,000 pounds ($260,000) in the first half of 2011 from 168,936 pounds in the first half of 2010.

Meanwhile, Galliford said selling prices rose 10 percent to £227,000.

Last week, figures from the Bank of England showed that British mortgage approvals rose only slightly in May, pointing to a soft housing market.

There is more hope for London stocks, Godber believes.

"I still think there's plenty of value around," Godber, whose fund rose by 3 percent to the end of May, compared to a rise of 3.4 percent for the FTSE-All Share Total Return, said.

"We are in a situation where markets are very choppy, up and down, that's the new toolbox you've got to deal with when you've got a low growth world."

What we've seen in the last 18 months is that those companies that deliver, that have niche franchises, that have sustainable growth have been not just re-rated but really re-rated to twenty-five, thirty times earnings, something we didn't see in the last bull market," he added.

"There's a whole cluster of those shares listed in the UK today."

Pharmaceuticals and healthcare companies such as artificial hips maker Smith & Nephew and AstraZeneca are among Godber's tips.

"It's such a cash-generative business and is now down to one of the lowest-rated bluechips in Europe so I think it's one to stick with," he said of AstraZeneca, in which Matterley holds one of its largest positions.

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