Archive for May, 2008

Gulfnews.com reports (5/30) that New York City real estate investors hope to recreate the kinds of gains realized by Asian and Middle East SWFs during their recent investment period in New York City’s big banks following the subprime losses by investing in ME real estate on the cheap. The GM Building in NYC is in play among ME investors. American RE investors are hoping to nab opportunities in the ME to counter the tumultuous returns in American RE markets.

The India-based sector analysis firm released its new report: “Middle East Retail Sector Analysis (2007-2010).” RNCOS, based on country-level analysis of the retail industry in the ME, focuses on growing opportunities in the ME markets. PR-Canada.net reports (5/30) “The retail sector in the Middle East region is growing rapidly. The increasing household consumption, affluent population, and booming services industry (tourism, banking and trading sectors) are propelling growth of the region’s retail industry. Also, the modern shopping malls anchoring state-of-the-art hypermarkets and various shopping events like Dubai Shopping Festival, makes the region a highly profitable destination for retail players.”

India’s fourth largest software firm confirms anticipation (5/30) of inking deals in Asia and the Middle East in the next quarter. “The outlook for deal closures is very positive in the Middle East and positive in Australia,” Virender Aggarwal, the director for Asia Pacific, Middle East, India and Africa, told Reuters in an interview on Friday.

Germany-based Allianz Global, one of the world’s five largest asset managers with $1.4T under management, has indicated (5/28) it will open its ME office in Bahrain, and that it intends to open two Sharia-compliant equity funds for the region. The firm sees ME as a growing extension of its successes in Europe, Asia, and the US. Read the Gulf Daily News article.

Diversified UK law firm Eversheds recently announced (5/28) the impending opening of its latest branch in UAE, following successful receipt of a practice license, reports The Northern Echo. The expanding firm has also opened offices in South Africa, Switzerland, Lithuania, Latvia, Estonia, Prague, and Bratislava in the past twelve months.

Gulfnews reports (5/27) that ME banks anticipate spending $1T on tech and services over the next decade. Additionally, numerous ME banks intend to commit upwards of $3.5B in banking upgrades in half that time. Dubai plans to host the first Middle East International Banking, Finance Technology and Services Exhibition and Conference to bring together companies and leaders to discuss.

Wall Street Journal sources (5/27), reports Bloomberg, suggest that hedge funds and investors are betting that Saudi Arabia, Qatar, and the UAE will break their currencies’ pegs to the US dollar. The upshot for these and perhaps other Middle Eastern states is that doing so would likely allow their currency to rise in value relative to the USD, which remains the world’s dominant reserve currency even during a prolonged period of relative weakness.

Bloomberg reports (5/27) that the Iran Mercantile Exchange (IME) will begin trading futures contracts in selected commodities in July, with a view to eventually trading oil. IME began trading spot contracts in petrochemicals in February. IME’s future contracts will bear one- to three-month delivery periods.

In April, Forbes reported that at least $500 billion in global assets are managed in accordance with Sharia (Islamic) law, with sustained annual growth of 10-plus percent. While bank stocks and the banking industry are being treated as “toxic” in the U.S. (and parts of Europe) due to the massive writedowns and uncertainty of what else may remain on the books, Islamic finance is booming! Many of the sources of distress for “western” banks would have largely been avoided per inherent Sharia limitations. Interestingly enough, Middle Eastern wealth is helping to shore up the capital bases of some of the most prominent western banks and eventually may result in handsome returns.

Key takeaways from the RGE Monitor’s recent coverage (5/14) of the Middle East:

“The IMF’s latest regional outlook for the Middle East – released on Monday – suggests that high oil prices will continue to fuel both government spending and private sector investment – making the Middle East the only region likely to maintain its 2007 growth rate (of about 6%).” [Emphasis added]

On the flip side is inflationary pressures and the negative implications of having a pegged currency. RGE notes that “GCC countries have ruled out exiting their pegs or revaluing for now, preferring instead to cushion their population from food inflation through price caps, rent controls and wage hikes.”

Nevertheless, while GCC countries are spending more domestically, “much of the windfall from oil is being saved abroad.” Most noticeable and controversial are Sovereign Wealth Funds (SWF). RGE’s Rachel Ziemba notes the pause in dollar diversification to exploit the dollar weakness and snapping up of distressed assets.

Meanwhile, as the debate over supply/demand of oil continues, the reality is that regional growth is sustainable and trade opportunities are abundant.