Middle East Awards 2014

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IddLE EAST AwARdS SuppLEm

ENT 2014

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mIddLE EAST AwARdSCelebrating achievement in the region

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CELEBRATING ITS THIRDCONSECUTIVE ACHIEVEMENTAS BEST BROKER OF THE YEARInternational recognition is not only a performance award but it is a stimulus for further commitment and determination. Global Investor ISF, a flagship title published by Euromoney Institutional Investor, has held its annual awards event to celebrate for the 3rd consecutive year high achievement within the asset management industry giving MedSecurities best broker of the year award in Lebanon.

MEDSECURITIES AWARDED BEST BROKER OF THE YEAR FOR THE 3RD CONSECUTIVE YEAR

BY GLOBAL INVESTOR ISF.

Tel: (961 1) 371333email: [email protected]

GLOBAL INVESTOR/ISF mIddLE EAST AwARdS 2014 1 WWW.GLOBALINVESTORMAGAZINE.COM

| editor’s letter

Editor Alastair O’Dell Tel +44 (0)20 7779 [email protected]

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Contributors James Gavin, Paul Golden and Hugo Cox

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Dear reader,

Congratulations to all the deserving winners of the Global Investor/ISF Mid-dle East Awards 2014. There were more applications, and they were of a higher quality, than in any previous year. Any of the firms being recognised for their achievements in Dubai on October 29 can rightly feel proud.

It has certainly been an exciting year for the GCC region, so such an occasion is a good time to pause for reflection and take stock of acheivements. This year will be remembered as the one when Qatar and the UAE finally received their much-anticipated – and well-deserved – upgrade by MSCI into its Emerging Markets Index.

Qatar instantaneously became the biggest emerging market in the Middle East and its main index experienced a smooth transition (see page 45). The UAE has suffered a major stock market correction since it was formally upgraded. However, this had little to do with the market per se and was not much more than an isolated case (see page 54). It is actually reassuring. All markets experience shocks. To be tested by a shock and come through it so quickly and with so little fuss demon-strates robustness – a point that will not be lost on international investors.

It is fitting that our Middle East CEO of the year, Shayne Nelson of Emirates NBD, represents one of these newly-upgraded nations (see page 10). His firm is on track to deal with the overhang from 2009 – and it will be just a memory by the second quarter of next year. He has even been able similtaneously to increase revenues and keep down costs to the point where net profits are up 30%.

The big event of next year will, of course, be the opening of the Saudi Arabian mar-ket to the foreign ownership of listed equities. International investors have started to take a keen interest in developments and firms in the region and beyond have started to plan for the momentous event (see page 35).

All these subjects, and many more, were touched on at our annual roundtable, which was this year attended by an excellent cross-section of practitioners in the region, from an index provider and asset managers to an asset servicer and a con-sultant (see page 18).

With so much positive news emanating from the GCC markets, we can all feel con-fident that next year will be one of continued progression.

Kind regards, Alastair O’Dell Editor +44 20 7779 8004 [email protected]

Credit where it’s due

2 mIddLE EAST AwARdS 2014 GLOBAL INVESTOR/ISF WWW.GLOBALINVESTORMAGAZINE.COM

MIDDLE EAST AWARDS 2014 |

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1 editor’s letter4 NeWs

The top stories from www.globalinvestormagazine.com

6 iNVestor PreFereNCesJames Gavin investigates the types of investment products that may appeal to Middle Eastern investors more than ones designed for Western markets

reGioNAl AWArds10 Ceo oF tHe YeAr

Alastair O’Dell speaks to Shayne Nelson, Group CEO of Emirates NBD, about his strategic priorities for the firm and the next stages of the development of Dubai financial centre

12 reGioNAl Asset MANAGer reGioNAl BroKer 13 eQUities MANAGer FiXed iNCoMe MANAGer 14 sHAriA FUNd sUKUK MANAGer 15 Best NeWCoMer Best NeW FUNd16 WeAltH MANAGer CAsH MANAGer

18 roUNdtABleA panel of asset managers and asset servicers discuss the major developments in the industry and plans to support future success

Asset serViCiNG AWArds28 GloBAl CUstodiAN sUB-CUstodiAN 30 FUNd AdMiNistrAtor GCC FiNANCiAl CeNtre 32 trANsitioN MANAGer MeNA FiNANCiAl CeNtre 34 CoNsUltANCY eXCHANGe

35 sAUdi ArABiAThe long awaited opening of the Saudi Arabian market will soon be a reality. Paul Golden investigates how this will transpire and what firms are doing to prepare

Asset MANAGer AWArds39 Best sAUdi ArABiA UAe41 QAtAr eGYPt42 BAHrAiN leBANoN43 KUWAit44 oMAN

46 dUBAiJames Gavin reports on the return to boom-time in the UAE market, and the accompanying build-up of corporate debt

BroKer AWArds48 sAUdi ArABiA UAe49 QAtAr eGYPt50 BAHrAiN leBANoN51 KUWAit oMAN52 JordAN PAlestiNe

54 QAtArJames Gavin considers the effect of reforms such as increasing foreign ownership limits and the MSCI upgrade on its capital markets

56 Best oF tHe WeBContent available exclusively at www.globalinvestormagazine.com

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NeWs |

GOOd CORpORATE GOVERNANCE IN dIFC FIRmS, dFSA FINdSThere is a good level of corporate compliance from institutions licensed by the Dubai Interna-tional Financial Centre (DIFC) and their governance structures and arrangements generally reflected the nature, scale and complexity of the businesses reviewed, finds a Dubai Finan-cial Services Authority (DFSA) review.

However, the review also found that in some cases the practices of some institutions fell short of their own policies. The DFSA noted that governance arrangements and responsi-bilities often did not align to business plans and strategies. It stated that those institutions should comply with their stated polices or amend them to reflect current practices.

A significant finding of the review was that firms often did not carry out structured, peri-

odic reviews of their governing bodies and their committees, or their effectiveness.

Ian Johnston, CEO of the DFSA, said: “The findings of the review provide a bench-mark and reference that should be used by institu-tions to assess their corporate governance frameworks and practices. The DFSA is work-ing to enhance the quality of governance of regulated businesses in the DIFC and where we detect governance failures we will rectify them through supervisory methods or enforcement action.”

While the DFSA routinely reviews the quality of govern-ance in regulated businesses in the DIFC, this is the first full-scale corporate governance review and it is the first time the DFSA has issued a report on the subject. n

BRIAN TIppLE jOINS AdIAThe Abu Dhabi Invest-ment Authority (ADIA) has appointed Brian Tip-ple as its first global head of external equities. Tipple will manage the department’s team of investment professionals and will report to Obaid Al Suwaidi, executive director of external equities.

Based in Abu Dhabi, Tip-ple will, together with senior management, be responsible for developing, implementing and driving overall investment strategy for the external equi-ties department, as well as overseeing the activities of externally-managed portfolios.

Al Suwaidi said: “Over more than three decades in the asset management industry, Brian has proven himself an astute investor and leader with a deep understanding of global equity markets. He will play an important role in manag-ing the department’s existing investments, while further developing and refining our strategy in the external equi-ties space.”

Tipple joins ADIA from Key Private Bank, where he was chief investment officer for the bank’s $30bn multi-asset, multi-strategy investment business. n

AShmORE pREdICTS FuRThER GAINS FOR EmERGING mARKETSEmerging markets will become increasingly relevant in invest-ment portfolios, according to Ashmore as it revealed its annual results.

Emerging nations are gener-ally in good health – aggregate GDP growth in emerging mar-kets was 4.5% in 2013 and is expected to be higher still in 2014, inflation is at acceptable levels and foreign exchange (FX) reserves remain strong.

Mark Coombs, CEO of Ashmore Group, said: “Devel-oped markets are weaning themselves off unprecedented monetary policy experiments while emerging markets need to decide how to manage sub-stantial FX reserves in the face of potential foreign currency weakness.

“This will lead to greater balance and rising emerging markets relevance in invest-

ment portfolios. Investors will increasingly need to differen-tiate between those countries and companies that foresee and plan for the unwinding of global imbalances, and those that are ill-prepared.”

Ashmore Group, a specialist emerging markets asset man-ager, has recorded assets under management (AuM) of $75bn, a slight dip from $77.4bn last year. Nevertheless, the firm had strong long-term invest-ment performance with 81% of AuM outperforming bench-marks over three years and 92% over five years, compared with 92% and 73%, published last year.

Coombs added: “Ashmore’s financial results for the year reflect the impact of market volatility experienced for much of the period and the effects of sterling strength.” n

mIRABAud hIRES mIddLE EAST BuSINESS dEVELOpmENT hEAdMirabaud Asset Management has hired Majid Hassan as head of business development in the Middle East. The move is part of the firm’s development strat-egy to expand its sales force and investment capabilities.

Hassan will be responsible for promoting Mirabaud to investors including sovereign wealth funds, banks, pension funds and family offices in Gulf Cooperation Council countries. He will be based in Mirabaud’s Dubai office and join the 20-strong team led by chief officer Olivier Honsberger.

Bertrand Bricheux, head

of sales and marketing said: “We are very pleased to have a dedicated specialist for the Middle East such as Majid on our team, particularly given the strategic importance of the region. Our strong presence in Dubai with a fully-fledged operation demonstrates the long-term commitment of the group towards the region.”

Hassan has worked in large international groups, includ-ing AIG Investments and Standard Chartered, promot-ing investments to investors based in Dubai, Abu Dhabi and Saudi Arabia. n

EmIRATES NBd ISSuES $500m CApITAL NOTESEmirates NBD has raised half a billion dollars of capital to replace recently repaid funding. Emirates NBD 2014 Tier 1 successfully issued $500m perpetual tier-1 capital notes, which will allow the

firm to replace the tier-2 issue that was repaid in July.

The issuer is guaranteed by Emirates NBD, rated Baa1 by Moody’s and A+ by Fitch. The notes pay a coupon of 6.375% and are callable by the issuer after six years and every coupon date thereafter.

“This issue improves not only the qual-ity of capital but also the cost-efficiency of the capital base,” said Shayne Nelson, group CEO of Emirates NBD. “We were extremely pleased with feedback from our investor meetings in the Middle East, Asia and Europe.”


GCC Asset MANAGeMeNt |

The Middle East is of course a very cash rich these days, with oil and gas revenues circulating through regional economies and yielding sub-

stantial reserves of investable capital. Western asset managers, meanwhile, have global investment expertise in abun-dance. Put the two together and it should be a great match. Yet up to now, asset managers, whether of local or foreign stripes, have generally struggled to make an impact in the region.

A generally conservative investment culture, real estate and basic money mar-ket funds to the fore, has meant limited appetite for fund products. And with insti-tutional investors playing a less important role – reflecting the absence until fairly recently of a sizeable pool of pension fund savings – compared to retail investors, the pickings for Western players have tended to be on thin.

The conservatism can be explained, says one Qatari asset manager, by the fact that wealth in Gulf Cooperation Councils

(GCC) states is relatively new. Oil prices, and as a result government revenues, were much lower 15 years ago.

“Not all but most high-net-worth entrepreneurs in the region made their wealth in recent years, which is the rea-son for the real estate focus and general conservatism,” says the Doha-based asset management chief. “That said, this is changing rapidly and low interest rates are helping. In Qatar in particular, interest in owning equities is very high.”

Professional asset management is still

The wealth of nationsInternational investors’ interest in GCC assets is matched only by the region’s asset managers’ enthusiasm for getting out on to the world stage, says James Gavin


very small but growing in countries such as Qatar, with total assets under manage-ment (AuM) estimated to be around 2% of the free float market capitalisation.

Arindam Das, regional head of HSBC Securities Services, Middle East and north Africa (Mena), says: “Asset and prod-uct classes in the Mena region are quite vanilla, most of the markets are dominated by equities. Some markets have nascent fixed income capabilities, and there is the odd ETF, but these have not really gained traction yet. Recently, however, we have seen encouraging signs in several coun-tries to activate these markets.”

Comprehensive up-to-date data is scant, but a survey from National Bank of Abu Dhabi found that by mid-2012 there were 1,424 funds with assets of $89.6bn in the Mena region, suggesting it is punching below its weight given the multibillion hydrocarbons revenues circu-lating through these economies.

Another survey conducted by the Qatar Financial Centre (QFC) in 2013 detected a bounceback in Mena asset management with a growing interest in fixed income among managers. Despite yields being overshadowed by higher predicted equity returns and the move to a more risk-on environment, the QFC Asset Manage-ment Barometer found that public and private debt was becoming a mainstream and popular investment vehicle across Mena.

Investor baseOne reason for increased confidence is the evolution of a diversified institutional investor base, including a local private pension funds industry and existing state pension funds that are becoming increas-ingly willing to engage with local markets. An Invesco survey of the Mena market last year estimated that pension funds now made up more than 15% of all new sover-eign assets placed in the Gulf region.

“Over the last five years the pools of cap-ital have increased, and the pension funds have become more sophisticated. That has created a lot of opportunities,” says Rich-ard Souri, senior vice-president and head of Middle East at Old Mutual Asset Man-agement (OMAM), a multi-boutique asset manager with $215m in AuM.

In any case, notes Souri, the conserva-tism of Middle Eastern investors is a

sophisticated one. “Over the years inves-tors in the region have developed a deeper understanding of risk management and this is evident when you look at the big institutions, the sovereign wealth funds and pension funds. Risk management has become an important part of the invest-ment process and this has led to greater awareness of investment styles in the market.”

Asset managers in the UAE, for exam-ple, face a truly diverse market, says Nigel Sillitoe, CEO of Insight Discovery, a Dubai-based research firm. “At one end of the spectrum there are a relatively small number of sophisticated sovereign wealth funds (SWFs), pension funds, and segre-gated mandates whereas at the other end of the spectrum are a vast number of indi-vidual retail customers.”

Traditionally, the more sophisticated Gulf-based clients have invested in the broadest range of asset categories and investment vehicles whereas the average retail customer has been less willing to diversify into more esoteric asset types. The key to both markets, says Sillitoe, is

education and communication and the more successful fund managers are heav-ily involved in investor education and awareness.

While customers are familiar with almost all product types, individual retail customers need more guidance and pro-fessional advice. “Institutional investors have a good awareness of product types, but with retail investors more needs to be done to inform them about the opportuni-ties,” says OMAM’s Souri.

With all investors looking at total costs of investment there has been a rise in interest in passive, index-tracking funds such as exchange traded funds (ETFs). “For those customers with general prac-tice financial advisers who do not want to give stock level advice, multi-asset and multi-manager funds are growing in importance,” says Sillitoe.

Risk appetiteMany of the recent inflows are still held in money market funds reflecting a prefer-ence for short-term investment horizons. Money market instruments remain the dominant 49% of AuM in the GCC and 55% of total industry assets across Mena, according to the QFC research.

That survey suggests the flow of wider-Mena capital into the GCC, which has mostly found a home in money market funds, is expected to continue in the short to medium term, with many expecting these safe inflows to take on a more risk-on guise as investors “latch on to a new economic cycle” and show an appetite for “moving up the yield curve” and “taking on more risk”.

The return to a more risk-on environ-ment is also evidenced in a reweighting of portfolios towards equities. Short-term regional instability is having little negative impact in the mutual funds arena, which in any case enables investors to diversify risk across a larger number of underlying stock holdings take a longer-term view of markets and stocks.

“Retail customers that might have been attracted to individual stocks on the local exchanges are often steered towards mutual funds when the nerves set in. Well-diversified international or multi-asset funds provide less of a rollercoaster ride for investors and consequently benefit when investors’ mindsets moves to risk-off,” says Sillitoe.

Local investor attitudes are no longer dependent just on moves on the local bourses. “Investors in the GCC are out-wards-focused and are typically much more aware of regional and international issues. This comes from not only a com-modities-based heritage but also from the

“Both foreign and local asset managers will in future have to put more effort into promoting

their services to foreign investors”

jOEL KuKEmELK, LhV

“well diversified international or multi-asset funds provide less of a rollercoaster ride for investors and consequently benefit when

investors’ mindsets moves to risk off” NIGEL SILLITOE, INSIGhT dISCOVERy


GCC Asset MANAGeMeNt |

fact that so many residents of the GCC states are either from foreign countries or have been educated outside the GCC,” he adds.

In the Gulf region, whether the mood is risk-on or risk-off depends largely on the state of the oil price and the way that it influences investment strategies. “If oil prices go down from where they are now, there will be momentum towards a risk-off situation. But as long as the prices trade in a good range, institutions will want to invest capital,” says Souri.

With pools of capital increasing over the last five years, pension funds have become more sophisticated. That has created a lot of opportunities for asset managers. Underpinning this is the evolution of Gulf financial hubs QFC and the Dubai Inter-national Financial Centre (DIFC), which have helped develop a domestic fund management markets and house custo-dial and fund administration services.

Pension funds’ asset allocation strate-gies are still evolving in the Mena region, but Invesco’s report finds three broad trends. One group of sophisticated pen-sion funds have acquired expertise from international institutions and built in-house asset allocation models. Another group outsources a large portion of deci-sion-making – so-called implemented consulting – to international consultants, and the final group is still in the initial phases of development, either defining benchmarks or awaiting a decision over the consolidation of assets from different government employee schemes.

International attentionThe emerging opportunity set in the Middle East has not gone unnoticed by international asset managers. OMAM is marketing the investment capabilities of seven firms to institutional investors in the GCC, including SWFs, local pension funds and family offices. “The Middle East is a very strategic region for us. It is a region that is already well serviced by western asset managers, but we will see greater interest in covering the region is from emerging market managers,” says Souri.

Others are moving in to acquire local teams. In February 2014, US-headquar-tered Lazard hired former ING managers to its Dubai asset management business. The new team is tasked with manag-ing Mena and frontier markets equity strategies for local and global clients, leveraging Lazard asset management’s extensive emerging markets expertise and global research resources. Lazard did not previously have a Middle East asset man-agement business.

ING’s decision to close its Middle East

asset management presence was taken following the adoption of a strategy that entails offering only fully-fledged opera-tions in countries where it also has a strong insurance presence.

“International asset allocators have been slowly investing into local equity markets, and have been very active in the debt market,” says Lawrie Chandler, founder of London-based asset manager Edale.

Firms that can show AuM above $500m should have sufficient clout to attract allocations from local SWFs and global investors alike.

What is driving the move to Mena is that overseas investors have also slowly returned to local markets recently. “Those who entered in 2005-06 got burned quite

heavily so there has been a hangover from that,” says Chandler.

There are three basic dynamics under-way in the region. Local asset managers investing externally, international asset managers buying into GCC securities and, more unusually, the export and re-import market, where local investors use interna-tional wealth advisers to buy GCC bonds and equities.

“Local asset managers are servicing local needs, so their challenge is to export their skills and capabilities to non-GCC investors,” says Chandler. “They will be competing on the international stage with global asset managers. They will need international status, and the golden halo effect of Ucits. If they try to market a Cay-man or BVI structure, they will encounter

“Over the last five years the pools of capital have increased, and the pension funds have

become more sophisticated” RIChARd SOuRI, OLd muTuAL ASSET mANAGEmENT

“International asset allocators have been slowly investing into local equity markets,

and have been very active in the debt market” LAwRIE ChANdLER, EdALE


little interest and struggle now AIFM [directive] has come into force across Europe.”

Local asset managers may find themselves in competition with global investment houses that have set up a Middle East investment desk. “If asset managers only have funds domiciled in a GCC nation, their capability of selling those on the international market will be limited,” says Chandler.

There remains a great deal of potential for fund houses in this region. “We are regularly being contacted by fund man-agement companies that want to research the potential available to them from the GCC markets,” says Insight Discovery’s Sillitoe. “Never a week goes by without a conversation with potential new market

entrants. All market entry options are on the table here in the GCC whether it be merger or acquisition or organic.”

A multi-boutique approach is appropri-ate for the region as it can access different asset classes and sectors with different spe-cialties, as the cycles in the market change, according to OMAM’s Souri.

Some international asset managers are marketing Middle East funds to a broader institutional audience, as global investors begin to understand that the activities of the so-called Islamic State in Syria do not necessarily impinge on the economic growth of Gulf states.

Joel Kukemelk, fund manager of LHV Persian Gulf Fund, which was launched in 2008, says: “When we started our fund, many were focused on the Mena region as a whole but we distinguished the oil-rich GCC from the rest of the region. We saw that this region had a specific investment theme, with governments recycling oil and gas revenue into their economies.

“Foreign investor participation in GCC stock markets is very low, and that’s why most asset managers that promote Mid-dle East funds focus on promoting them inside the region. But there’s a lot of money outside the region and a huge potential for foreign investors, who are starting to take more notice of the GCC. Both foreign and local asset managers will in future have to put more effort into promoting their ser-vices to foreign investors.” g

Asset servicingAsset servicing is another fertile area for foreign entries. HSBC has been offer-ing sub-custody in the region since the 1990s, though it was not until 2008 that the first set of other international sub-custodians came into the Mena market.

“The dynamics of the business changed significantly as a result of the global financial crisis,” says HSBC’s Das. “As a result, the aggressive expansion that many had planned did not materialise. And it is not clear yet if that will change now that market conditions have improved and more investors are com-ing back into the region.”

HSBC Securities Services has been able to retain its market share, says Das. “While we have had an edge due to being the first mover, we have managed to retain that first mover advantage by con-tinuously investing in the business and engaging closely with our client base.”

The upgrade of Qatar and the UAE to MSCI emerging market status will put the Middle East on to the radar screen of a broader range international investors. Add to that the improved perfor-mance in the region, compared with the flight from risk seen in Asian markets, and there will be a significant impact on the asset management industry. But, says Chandler, the biggest impact will come from the Saudi market opening up to foreign investors from 2015. “That is more of a tectonic shift than the MSCI upgrade.”

“The dynamics of the business changed

significantly as a result of the global financial crisis”

ARINdum dAS, hSBC SECuRITIES SERVICES



CEO OF ThE yEAR

Shayne Nelson, group CEO of Emirates NBD, has been crowned the Global Investor/ISF Middle East CEO of the year due to three factors that boosted

ENBD’s performance since taking up the position – revenue growth while control-ling costs, risk management, and fostering an effective corportate culture.

Emirates NBD’s net profits for the first half of 2014 are up 30% to AED2.35bn ($639.7m), which according to Nelson is one of the biggest achievement for the bank during the first half of the year. It was achieved through a combination of very good revenue growth and keeping costs in control, with a cost-to-income ratio of 30.3% for the first six months of 2014 (4.2% lower than Q1 2013).

Nelson comes from a risk management background, so one of his key priorities was strengthening this within the group, as well as compliance functions. This included creating a unit to deal with prob-lem loans, mostly related to real estate, which is apparently mak-ing good headway – usefully aided by the recovery. Its task is expected to be finished by the end of Q1 2015. “If we can meet this target that would be a very good outcome for the bank and would lead its growth in the future.”

Nelson has also realigned certain seg-ments of the business to better support the implementation of the group’s strat-egy. He has tried to instil a “performance culture with accountability” and has

restructured the management and gov-ernance at the leadership level, bringing in new faces and experienced talent into key positions.

Looking ahead, Emirates NBD will continue to strengthen its balance sheet, building on work already done to strengthen liquidity, improve its capital and business mix, improving non-per-forming loans and imposing higher coverage ratios. “I want to ensure that these improvements continue so that the bank can take advantage of future oppor-tunities through our clear strategy,” he says.

The Dubai Financial Market (DFM) has set new all-time highs this year. Is this growth sustainable, and how far could this go?The Dubai stock market has been the best performing market in the region, show-ing gains of 50% in the year till August 2014. This growth has been backed by an

improvement in general economic activity in the Emir-ate. GDP growth has been driven by an expansion in non-oil sectors, particularly tour-ism, retailing and manufacturing.

Rising corporate profits have also been another reason for the stellar perfor-mance. Listed companies on the DFM have reported healthy growth for the first half of financial year 2014. Net profit was up by a strong 46% [to AED12.2bn, according to Kamco Research]. Stocks related to the recovery of the real estate

sector have done well due to increased profitability and overall positive senti-ment for the sector. The banking sector also reported healthy growth in net profits on the back of adecline in provisions, cou-pled with higher operating income.

The market [as of Aug 2014] trades at 18 to 19 times earnings, which is in line with the broader GCC markets. The MSCI upgrade has obviously also helped as more foreign institutional investors have invested in UAE markets. How big an impact the MSCI upgrade has had needs to be ascertained through empiri-cal studies.

Moreover, on the economic front, inves-tor sentiment seems to be positive. The UAE’s purchasing managers’ index (PMI) rose to a series high of 58.4 last month, from 58 in July, on strengthening domes-tic and external demand.

Some of this growth is funded by cor-porate debt – are you concerned it building up?The UAE central bank regulates the banks very closely and has set up a number of rules regarding the right exposures. Fol-lowing the financial crisis, banks beefed

Alastair O’Dell speaks to Shayne Nelson, group CEO of Emirates NBD, ahead of being awarded the title of Global Investor/ISF Middle East CEO of the year

A profitable position

“The consolidation of the various uAE stock markets is

perhaps another much needed move, as this will energise

financial markets”


up their risk management units and are also more careful in their lending practices, with increased due diligence on the utilisation of funds and loans. We do not believe that we will see a similar situation to the one we witnessed in pre-crisis times. However, we all need to be careful that the mistakes of the past are not repeated.

What regulatory changes would you like to see in the UAE and wider region? What could the authorities do to foster the next stage of development of the financial markets?According to the Financial Stability Report published earlier this year, the cen-tral bank of the UAE is also in the process of reviewing and updating banking sector regulations to align local regu-lations with international best practice.

One of the major changes in the UAE financial services sec-tor has been the much awaited Al Etihad Credit Bureau becoming operational. With the consumer credit reports now available for members of the bureau, we can expect to see a significant impact on the lending patterns of UAE banks. While there may be a drop in consumer lending in the short term, we believe the bureau will prove to be a major positive move in the long term.

Another upcoming change will include the requirement for banks to hold capi-tal in line with the requirements of Basel III rules, a set of international capital adequacy standards that are expected to further strengthen the framework in the financial services sector.

The consolidation of the various UAE stock markets is perhaps another much needed move, as this will energise financial markets, making it easier to stimulating trade and attract more foreign invest-ment, as well as make it easier for investors to operate across the markets

How is Emirates NBD going to strategi-cally position itself to take advantage of the Saudi Arabian Tadawul opening in 2015?Emirates NBD is the only UAE bank to have a full branch licence in the King-dom of Saudi Arabia (KSA). Alongside

this we are the only foreign bank to have a full-fledged investment banking and brokerage license from the Capital Mar-ket Authority (CMA) for our investment banking entity ENBD Capital KSA.

This entity has licence to offer broker-age, asset management, custody, advisory and investment banking [debt and equity capital market] services. We have already established full brokerage operations and we believe we have the opportunity to become a major conduit for foreign funds flowing into the Tadawul once that is allowed.

Based on demand from our clients and customers, we are also in the process of introducing other services such as margin lending. With our asset management unit here in DIFC, we are in a good position to set up funds focused on the Tadawul. We will streamline our plans as we see the market develop.

The first IPO in Dubai in five years took place recently. How significant was this?The recent IPO revival in the UAE is a reflection of Dubai’s resurgent economy. In addi-tion to underscoring the DFM’s performance, it is also driven by the UAE’s upgrade to emerging market status by MSCI. The growing interest from foreign investors will further energise the markets. Rising corporate profits and an increased confidence in the key sectors of the economy will drive the demand for invest-ment and capital. With overall sentiment towards the posi-tive side, IPO activity is bound to pick up as business groups unlock value and raise capi-tal for expansion in a growing economy.

How many financial centres does the GCC need? Are sev-eral needed or should there be consolidation?A multi-market system is not unique to the GCC and it can prove to be a viable model, with alignment of systems and regulations. To do that, indi-vidual centres need to focus on developing distinct and niche capabilities to avoid the risk of cannibalisation. A consoli-dated regional financial centre based on the European model can provide a stronger propo-sition to all stakeholders.

To what extent is the UAE a magnet for capital in the region?The UAE has established itself as a world class financial destination, with bank deposits rising by AED111bn in 2013, compared with an increase of AED98bn in 2012. Deposits have further increased by AED66bn in the period up to April this year.

However, banks need to be careful not to overlend in this increased liquid-ity scenario in the economy. Some of the deposits and liquidity which have come in due to UAE’s position as a safe haven in the region might not be for the long term and might gradually flow if conditions in some of the strife-riven countries improve.

We at Emirates NBD are being careful in this regard and have set ourselves a tar-get of 90% to 95% loan-to-deposit ratio so that we are not overstretched if the tide turns. g

“we do not believe that we will see a similar situation to the one we witnessed in pre-crisis

times. however, we all need to be careful”



REGIONAL ASSET mANAGER

QNB Asset ManagementThe Qatari fund manager has consistently outperformed benchmarks

QNB Asset Management describes itself as the leading asset management firm in Qatar, with assets under management of approximately QAR17bn ($4.7bn).

Since inception, all of its funds have outperformed their respective benchmarks, according to the firm. This year the Al Watani Fund I, for Qataris only, has grown an impressive 34.46% year-to-date. The primary aims of Al Watani Fund I are to seek outperform the Qatar Exchange Index while trying to reduce the associated risk. The Al Watani Fund I has outperformed the Qatar Exchange index ten times over since its inception in 2005 – 106.4% return against the benchmark of 10.03%.

The Al Watani Fund II, for non-Qataris only, has grown 34% year-to-date and has outperformed the Qatar Exchange index by almost 90% since inception in October 2005. All statistics are as of May 2014.

“Our funds consistently meet their objectives and outperform

their respective benchmarks. Our Al Watani Funds launched back in October 2005 have outperformed,” says Ather Naqi, head of business development. “We also manage discretionary man-dates on Qatar, GCC and other emerging markets on equities and global bonds.”

QNB was the first Qatari bank to launch a debt fund in its domestic market. Aiming to provide clients with stable returns and a low risk investment opportunity that supports the capital accumulation. This year QNB launched the QNB Commodity Fund, an investment tool that is regulated by Qatar Central Bank.

“QNB is always seeking ways to enhance the range of attractive investment opportunities available to its customers. The launch of the QNB Commodity Fund is a testament to our creative and innovative approach,” says a spokesman for the bank.

“QNB offers a wide range of investment products – funds, struc-tured notes and portfolio management services relating to local and regional markets that are tailored to meet each customer’s risk profile and specific investment strategy. Clients’ investments are continually managed and under the watchful eye of our expe-rienced team of fund managers.”

REGIONAL BROKER

Mubasher Financial ServicesInvestment in research has been vital to the success of mubasher

Mubasher Financial Services (MFS) is one of the leading pro-viders of regional brokerage in the Middle East for institutional investors. MFS was formed in 2006 and is regulated by the Cen-tral Bank of Bahrain as a Category 1 investment business firm. The head office of MFS is located in Bahrain and the firm has branches in Dubai, Jordan and Riyadh.

As a single counterparty, MFS provides institutions with a range of services to facilitate trading, clearing and settlement across the GCC, Middle East and most major developed stock markets. It employs more than 120 professionals across the region. Services include omnibus capability for dealing across the region and direct market access. The firm’s worked order capa-bility means MFS dealers target common benchmarks such as volume-weighted average price or VWAP (the ratio of the value traded to total volume traded over a particular time horizon), percentage volume and arrival price.

Back office services include clearing, FX and corporate actions. Other services offered include delivery versus payment (DVP)

trading limits and fix order routing from all major networks including Reuters, Bloomberg and Fidessa. MFS offers profes-sional dealing and order management screens to trade on behalf of multiple customer accounts, covering position keeping, real time and historical data, charting and technical analysis. Mar-ket information is drawn from sales traders as well as third party broker research.

First launched in the UAE in 2005, Mubasher Direct Brokers Financial Services (Mubasher DBFS) introduced real time mar-ket data and online trading in the United Arab Emirates and is now one of the most recognised trading companies in the UAE market, a position reflected by its market share and client base.

The Mubasher DBFS platform provides direct market access to individual clients and portfolio managers for local markets through a single account facility for multi-trading, supported by in-depth research and analysis and an array of trading tools. Clients can trade from any location and receive real time market information from any web portal.

Professional trading tools are designed to help clients optimise orders and clients can access research and analysis from experts who monitor global markets to provide information and translate the implications of events on a periodic basis.


EQuITIES mANAGER

NBK Capitalmena equities team increases Aum despite challenging conditions

NBK Capital manages three mutual funds (a GCC Fund, a Qatar Equity Fund and a Kuwait Equity Fund) as well as separately managed accounts or SMAs for institutional and high net worth clients.

Mena equities, the department responsible for managing listed equities within the asset management group of NBK Capi-tal, managed to achieve returns above benchmark during the judging period. The NBK Gulf Equity Fund returned 29% while the regional markets, as measured by the S&P GCC Composite LargeMid Cap Index, returned 22%. The NBK Qatar Equity Fund returned 20%, in line with its benchmark. The NBK Kuwait Equity Fund returned 18% – outperforming its benchmark by 5% – and the SMA portfolios recorded returns as high as 33% and alpha of 12%.

Mena equities managed to increase its AuM significantly in 2013 in what was otherwise a challenging year for asset raising in the region. NBK Capital believes that its competitive advantage over other asset managers in Kuwait is due to three sources of strength: an experienced team employing best practice invest-

ment and risk management processes; a wide product offering; and the strong financial position of parent NBK Capital.

NBK Capital employs a team consisting of three portfolio man-agers and seven buy-side analysts. The portfolio managers cover the different countries in the region and have extensive experi-ence in managing Mena and GCC equities, while the analysts are sector-focused and employ state-of-the-art financial models to value listed companies and build in its knowledge of the different value drivers into the process, according to the firm.

NBK Capital’s investment process adheres to global standards in managing listed equities and employs advanced portfolio man-agement techniques. The systems used by its portfolio managers and buy-side analysts are almost unique in the region, according to the firm, and allows it to streamline the research and invest-ment management processes, in addition to adhering to the best practice standards in the areas of performance measurement and reporting.

In terms of advanced risk management tools, NBK Capital adopts two layers of ex-ante and ex-post risk measurement and management techniques. Both layers are embedded in the entire investment process and ensure adherence to investment guide-lines and risk controls.

FIXEd INCOmE mANAGER

Emirates NBD Asset ManagementBroadening client options yields success for Emirates NBd

Emirates NBD Asset Management (ENBD AM) is part of an independent asset management division based in the DIFC and backed by parent Emirates NBD Group, one of the largest finan-cial institutions in the region. It is regulated by the DFSA as a category II firm, with the additional ability to operate an Islamic window.

The firm provides a range of investment products structured on either a Sharia compliant or conventional basis, covering all major asset classes, including emerging market and Mena debt, from in-house managed public funds to bespoke discretionary portfolios.

Within the fixed income space, the team employs sophisticated techniques to drive performance and control risk, for example holding US treasury futures to hedge interest rates and employ-ing CDS on its emerging market strategy. The head of the desk, Usman Ahmed, who has been with the business for almost five years, is recognised as a leading expert in Mena debt.

ENBD AM has recorded AuM growth of 97% since October 2012 to AED9.63bn. Total fixed income desk AuM has increased to $1bn and profitability was up 170% in 2013, with 2014 profits already ahead of FY 2013 levels at end-July 2014.

Jersey funds AuM has risen to $1.24bn and new Luxembourg SICAV at $105m is expected to increase with the launch of eight new Luxembourg SICAV funds (including two fixed income funds). The New Fixed Income SICAV fund is up 8% since incep-tion (October 2013) and there has been consistent year-on-year benchmark outperformance in fixed income.

Both Emirates Mena Fixed Income and Islamic Money Market Funds have outperformed the benchmark every year since incep-tion in 2010, with a difference of +80 bps and +11 bps respectively over the last 12 months. Since July 2013, the Emirates Mena Fixed Income, Global Sukuk, Emerging Market Corporate Absolute Return and Money Market Funds returned 8.9%, 6.2%, 7.8%, and 0.4% respectively.

Over the last year, ENBD AM has demonstrated initiative in creating opportunities for clients, including the launch of two new Luxembourg SICAV funds and extension of the product range to include emerging market exposure across both equities and debt.

Following a tie up with Jupiter Asset Management for its global funds platforms, assets have risen by more than 60% and the firm has also made improvements to information provision. Its funds are domiciled in Jersey (regulated by the Jersey Finan-cial Services Commission) and in Luxembourg (regulated by the Commission de Survellance du Secteur Financier).



ShARIA FuNd mANAGER

Rasmala Egypt Asset ManagementThe asset manager’s equity fund topped the Egyptian performance ladder this year

Over the years, Rasmala Egypt Asset Management (REAM) has consistently achieved. Its equity fund ranked very highly on the Egyptian performance ladder during the 2013/14 financial year, ending in second place among 22 Egyptian funds. In 2013 the asset manager significantly outperformed the market, with the equity composite average return of 17.1% and 15.1% for Q1 2014. This performance resulted in a wave of additional inflow from existing clients, often following annual reviews of their asset managers.

Assets under management (AuM) have increased significantly during the past three years from EGP2.1bn ($290m) in 2011 to EGP3.3bn in 2012 and to EGP4.7bn in 2013. AuM reached EGP5.6bn during May 2014. This is an impressive achievement given a difficult year with an heated political climate and chal-lenging economic developments, including the Egyptian Central Bank decree that limited banks’ money market and fixed income fund assets to 7.5% of banks’ total deposits. Through innova-tive and well-tailored investment solutions, REAM was able to attract new money from existing clients as well as new local and international clients, including the largest sovereign wealth fund worldwide.

REAM is the strongest and fastest-growing asset manager in the market, according to the firm. The investment management team boasts “diversified expertise coupled with creative thinking

which allow offering our clients unique outcomes and exceeding their expectations”, according to a spokesman. It puts its growth in AuM down to following a product-tailored strategy – the company developed a new investment strategy called constant proportion portfolio insurance (CPPI). This trading strategy aims to provide a fixed minimum return at all times, or at a set date in the future.

REAM’s approach is focused on three key themes – offering value to clients, meeting differing client objectives, and provid-ing excellent and consistent investment performance. It aims to be regarded as a standard bearer for professional asset manage-ment, through offering a broad range of investment solutions in all the available asset classes in Egypt.

REAM has a strong buy-side proprietary research function. It actively engages with the companies it analyses and has ongoing discussions with their management to make sure that its research stays abreast changing dynamics, according to the firm. In the last six months alone this has held 73 meetings and 16 conference calls with management.

The company is also highly committed to a solid corporate social responsibility programme aimed at developing local indus-try and markets. It holds investment courses for members of the investment community and top university graduates, as well as providing scholarships to employees so that they can complete the Chartered Financial Analyst qualification. It maintains an interactive dialogue with clients by offering courses that brief them on fundamental aspects of professional asset management.

SuKuK mANAGER

BLMEThe London-based, dubai-listed bank has grown Aum in a challenging year

Bank of London and The Middle East (BLME) has continued to grow its assets under management where many Islamic asset managers have faced a challenging year. A key achievement for BLME has been the strong performance of its Global Sukuk Fund. Originally launched in 2011 as the High Yield Fund, the Global Sukuk Fund provides investors with exposure to a diversified portfolio of sukuk. Since its launch, the fund has demonstrated top-quartile performance in its peer group, as assessed by Reu-ters’ fund ranking service, Lipper Hindsight. Since inception it has ranked 68 out of 480 funds. It has also achieved a place in the top quartile in the rolling three year category, ranking 71 out of 488. BLME attributes its performance to a rigorous invest-ment process and strict risk management framework. The fund is available to trade on a daily basis and it is available in US dollars, euros, sterling and Australian dollars.

BLME is an independent UK, wholesale sharia-compliant bank based in London. The majority of its clients are based in the UAE and it has a representative office in the DIFC. Its asset management team is dedicated to delivering client-focused investment solutions tailored to client’s specific requirements. BLME offer a wide range of products and solutions, including fixed income, real estate, equities and real assets.

BLME received UK Financial Services Authority (FSA) author-isation in July 2007 and is the largest Islamic bank in Europe. It is led by a management team that brings together a combina-tion of experienced international bankers and experts in Islamic finance. The core divisions that make up BLME’s offering are cor-porate banking, treasury and wealth management comprising of private banking and asset management. To ensure that services and operations are wholly sharia-compliant the bank has a dedi-cated sharia supervisory board, which ensures that all policy and practice, as well as our corporate governance, are in accordance with sharia principles.


NEwCOmER

Lazard Asset ManagementOpened a new office in dubai following unprecedented period of growth

Lazard Asset Management has demonstrated excellent emerg-ing markets performance during turbulent market conditions with 18 of its 21 emerging market strategies outperforming over the 12 months to June 30 2014. Its performance and large net inflows have helped assets appreciate by approximately 20% over the period, making it one of unprecedented growth for the firm, taking assets up to a record £107bn ($175bn) including £38bn across 21 equity and fixed-income emerging market strategies.

Lazard received its regulatory license for Dubai in Q2 2014 and it immediately opened a new office, which provides investment management services and client servicing. By June 30 2014 it had nine employees led by senior executive officer Farah Foustok, who has worked in the investment field since 1994 and in 2012 was elected as the chairperson of the board for the UAE Financial Services Association.

Lazard Equity Strategy Mena is an actively managed strategy driven by a bottom-up investment process that focuses on the underlying fundamental drivers of individual companies. “The team looks at what helps companies create value for sharehold-ers through fundamental analysis that identifies sustainable visible returns and superior management,” says a spokesman. “It

is physical businesses that drive investment, not stock names on a terminal screen.”

The Mena equity strategy seeks to extract value “from what is an increasingly important component of the emerging-markets opportunity” by focusing on the fundamental drivers that help companies achieve value for shareholders. The portfolio manage-ment team have been managing mandates in the Mena region, together as a team, for seven years. The team’s local experience and networks of connections, “helps establish strong corporate relationships with local companies, enable it to identify underval-ued and undiscovered companies with quality earnings growth in a fast-growing region of the developing world”.

Lazard is committed to expanding its global footprint in the emerging markets space. In addition to the Dubai office it opened another one in Singapore, where it received its regulatory license in the third quarter of 2013. It set up in Dubai partly in recogni-tion that emerging market investment is changing: “The removal of Korea, Taiwan and Singapore from EM indices has provided investor opportunities.”

Along with traditional long-only, value-oriented emerging market equity strategies, Lazard has introduced more sophisti-cated equity, fixed income and multi-asset strategies. It has also responded to increased concerns about risk in the UK pension world by introducing emerging low volatility strategies.

NEw FuNd

NBAD – Cash Plus FundNew fund offers customers higher rates than conventional deposits while providing liquidity

The National Bank of Abu Dhabi (NBAD) Asset Management Group launched the Cash Plus Fund in July 2014. The fund is designed to offer liquidity, capital preservation and yield enhancement. It says the fund allows investors to benefit from higher rates than conventional deposits and while benefiting from liquidity. Designed for corporates, institutions and high-net-worth individuals, the fund ensures its clients’ liquidity position is maintained.

“NBAD has identified growth opportunities and ensured consistently healthy and robust growth in AuM. Our asset man-agement group is a pioneer in the UAE,” says Shreeja Soman, customer relationship manager at NBAD Asset Management. “We identified growth opportunities in the liquidity management solutions segment and put in a fully-resourced research and fund management team to manage client assets. This has enabled us to win a succession of institutional mandates and launch a number of mutual funds, which has propelled us to be regarded as one of the biggest and one of the best asset managers in the region.”

The fund is an open-ended, actively-managed product which aims to provide a yield in excess of overnight deposits, with

income distributed daily in the form of additional units. It aims to seize the best opportunities available by investing in a range of high-quality money market instruments in the UAE and wider Mena region in addition to Asia and Europe. Fund managers select money market instruments, including term deposits, cer-tificates of deposit, commercial papers, floating rate notes and short term bonds from banks and corporates in the Mena region, Asia and Europe.

Assets are diversified across a range of durations and liquid-ity terms in order to maximise the potential for high returns, while avoiding increase in volatility or hampering daily liquidity. Soman tells Global Investor/ISF that more innovative products will be released shortly.

“NBAD has been a pioneer of mutual funds in the region. In 2013 we launched the Mena Dividend Leader Fund, which has grown to over $324m in a short span of time,” she says.

“We have bold expansion plans and will be adding further asset classes over the coming months and expect to launch some headline grabbing initiatives very soon. We believe in long-term commitment to the markets that we operate in and will continue to devote significant resources to analysing and managing invest-ments that set us apart from our competition and continue to give comfort to our esteemed investors.”



wEALTh mANAGER

BarclaysRegional initiatives to benefit from global investment

Last year Barclays announced plans to invest £400m ($650m) in its wealth and investment management business globally. Resulting from this investment, one of the key initiatives in Mena includes BARX FX and BARX Comet, through which Barclays provides bankers and advisors in the region with direct access to prices for FX and structured products. This resulted in clients benefitting from greater speed of execution, streamlined docu-mentation and the ability to trade at smaller ticket sizes. The time taken to execute a reverse convertible trade from the Mena region has reduced from a couple of hours to just a click of a button with straight-through processing.

To ensure clients are receiving consistent proactive investment advice and specific investment expertise, Barclays now has a sys-tem whereby all clients with AuM over £5m have a dedicated investment advisor in addition to a private banker.

Senior team members from Barclays’ global research teams in London, Asia and Africa visit Mena quarterly to meet clients and host roadshows to showcase insights into the market outlook. The Mena private banking team is organised in line with specific client segments, to ensure that clients receive a service focused on

their specific needs in their preferred language.A new internal key client framework was rolled out in the

region in addition to Barclays’ global key client framework to ensure all ultra-high-net-worth (UHNW) clients have access to Barclays’ institutional-level expertise and advice and access to a much broader spectrum of investment ideas.

Barclays Wealth and Investment Management combines behav-ioural finance and psychology with modern portfolio management. Risk profiling is conducted on an ongoing basis as client requests are assessed against investment suitability as well as their changing circumstances. This takes place through the financial personality assessment tool, which measures six different aspects of an individ-ual’s personality, each of which relates to their financial behaviour and decision-making to provide a holistic overview of the client’s inherent responses to financial decision-making and help develop more effective investment solutions.

Barclays also offers its UHNW clients access to its global investment club proposition, which provides client-to-client investment opportunities and allows clients to leverage the geo-graphic and entrepreneurial diversity of Barclays institutional and private client network. Clients can request to be shown a specific subset of deals by structure – acquisition, co-investment or fund structure – size, region or industry group.

CASh mANAGEmENT

Arab BankOnline trade finance platform complements Arab Bank’s online cash management serviceArab Bank’s online cash management service, Corporate@Arabi, operates across the Middle East and North Africa. As service effi-ciency and customised solutions become increasingly important criteria for corporate customers, Arab Bank continues to invest in its infrastructure and capabilities.

A number of initiatives were introduced during the year to ensure proper client awareness – including customer train-ing and awareness sessions – and improve regional activity in cash management solutions, while at the same time providing advanced solutions to large companies operating in the region.

Corporate@Arabi allows for the management of subsidiaries by accessing their accounts within a single platform and using a single set of login details. This feature has appealed to holding companies that operate in different parts of the world. Additional product launches include rate negotiation, file services and file import and export.

Straight-through-processing capabilities for direct collections and all types of transfers are available through the cash man-agement platform, which gives the client real time execution of transaction and account balances.

Trade finance capabilities allow customers to manage their payments and receivables for their import and export require-

ments, as well as procurement and contracting business.Arab Bank’s suite of cash management products enables clients

to leverage the bank’s 600 branches across 30 countries, manag-ing all local and cross-border needs. Its coverage in the Middle East, North Africa, Europe and Australasia make it a suitable partner for international businesses looking to operate within the Mena region, or Mena-based companies looking to expand within the region.

Corporate commercial transactions – including the manage-ment of liquidity and cash payments in addition to the efficient handling of trade finance transaction – are a priority at Arab Bank. The bank’s offering also includes cross-border account management and services, as well foreign exchange services.

Its online trade finance platform complements the corporate offering, which includes domestic account and balance report-ing tools; liquidity and investment management; payments and collection management solutions; payables and receivables; reconciliation; cross-border accounts and reporting services; check services; and trade services covering all products as well as reporting and management information systems.

These two banking solutions allow all corporate custom-ers to manage their transaction business better internationally and domestically, ensuring better use of capital and liquidity management.

The more your wealth increases, the more you should be able to experience the freedom it can bring. From private banking to investments to succession planning, Barclays works with you to organise every facet of your wealth. That way you can enjoy all the advantages it brings, to give you the kind of return you want.

Call us in Dubai on +971 (4) 365 2900, in Abu Dhabi on +971 (2) 495 8329, or in the State of Qatar on +974 (4) 496 7515 or visit wealth.barclays.com/mena to make sure your wealth is working for you.

Wealth and Investment Management

Barclays offers wealth and investment management products and services to its clients through Barclays Bank PLC and its subsidiary companies. Barclays Bank PLC is registered in England and authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered No. 1026167. Registered Office: 1 Churchill Place, London E14 5HP. Barclays Bank PLC in the Dubai International Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority. Barclays Bank PLC DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA licence. Principal place of business: Wealth and investment management, Dubai International Financial Centre, The Gate Village Building No. 10, Level 6, PO Box 506674, Dubai, UAE. This information has been distributed by Barclays Bank PLC DIFC Branch. Related financial products or services are only available to Professional Clients as defined by the DFSA. Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to conduct business activities as a branch of a foreign bank in the UAE (Dubai Licence No.: 13/1844/2008, Registered Office: Building No. 6, Burj Dubai Business Hub, Sheikh Zayed Rd, Dubai City and Abu Dhabi Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan Street, PO Box 2734, Abu Dhabi). Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre Regulatory Authority. Barclays Bank PLC QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA authorisation. Principal place of business in Qatar: Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha, Qatar. This information has been distributed by Barclays Bank PLC. Related financial products or services are only available to Business Customers as defined by the QFCRA.

Ever wondered what ROI actually feels like?


Middle eAst roUNdtABle |

What happened to equity valuations and inflows following the entry of the United Arab Emirates (UAE) and Qatar into the MSCI Emerging Markets Index?

Robert Ansari: By the time MSCI has made its announcements about the reclas-sification of the UAE and Qatar, investors were already moving into these markets. By way of context, the amount of money tracking emerging markets now is about $1.5trn and of that approximately 20% is passive, which means that 80% of what was mathematically going to track these markets could have moved before the countries entered the MSCI Emerging Markets Index. Really, the MSCI catego-risation of these countries was following investor sentiment rather than leading it.

To gauge how much of the flows will have arrived by the time an index change like this takes place, it is worth just recap-ping the MSCI methodology. The first step

is that MSCI takes feedback from inves-tors around the world – MSCI is then a middle man that provides information back to the regulators and exchanges, which then react to that feedback.

The big misconception is that people think that once those rules are passed then we are good to go, but the reality is that once those rules are passed, what has to happen is investors need to enjoy the ben-efit of those changes. So, if it is something

like delivery versus payment (DVP), inves-tors need to see the impact of a rule change rather than just a rule change. So, by the time we get to the point of announce-ment a lot of work has already happened. In a way, MSCI’s classification is almost a by-product of things that are already happening rather than the cause of things happening.

Hammad Izz-e-Hamid: According to

The accession of UAE and Qatar to the MSCI EM index and the prospect of opening of Saudi Arabia’s Tadawul is shifting the investor base in the region. Global Investor/ISF speaks to seven experts in the region

pARTICIpANTSChair: hugo Cox, Global investor/ISFRobert Ansari, executive director and head of middle East, mSCIhammad Izz-e-hamid, securities services, middle East and Africa, deutsche BankArindam das, regional head of securities services, mena, hSBChusayn Shahrur, executive director of mena Equities at NBK CapitalAjay Kumar, assistant general manager, asset management, Qatar National Bank Claus Nouveau-Nikolajsen, managing director, global markets, AdS SecuritiesNigel Sillitoe, CEO, Insight discovery

Great expectations


analyst reports, $1bn to $2bn was likely to come into the markets over the course of one to two years. There is understandably a build-up and a sharp rise in anticipation of the actual inclusion in the index and a correction phase thereafter. In general, we believe that there will be increased flows as the market coverage increases. Macroeco-nomic fundamentals remain strong and should support stable inflow for institu-tional funds.

Arindam Das: The inflow has been far higher than analysts expected. Initial expectations were about $1.5bn. In the period May to June, we saw assets in our custody increase by more than $3.5bn. Part of it was market movement, but a lot of it was actual flow. It is difficult to esti-mate how much of this was contributed by passive funds, but I would think that a substantial amount was through them because active funds had the whole year leading up to this date to rebalance their

portfolios and invest in these two markets. Overall we underestimated the amount of passive funds that would come in follow-ing the upgrade.

Is the quality of corporate governance in the region improving, especially post-upgrade?

Husayn Shahrur: In the days and months leading to the countries entering the index we saw a lot of passive money coming in. This is not very relevant to improvements in the corporate governance and wider development of these capital markets as this money does not scrutinise companies and does not differentiate between com-panies with good practices or otherwise. By contrast, the active money, which is supposed to be chasing after good compa-nies or good sectors, has different impact in this regard. As we go along, these coun-tries will register increasingly on the radar of fund managers and institutional inves-

tors. Issues of corporate governance will come up more and more and companies that have lax practices will have to adapt and evolve if they are going to attract a wider investor base.

Ansari: This is still a priority. A lot of international asset owners now look for a high level of self-discipline. We now get a lot of fund managers coming to us and saying: “We need to have a stricter level of control or a higher culture of risk [assess-ment] in our organisations.” And there is a shift in those companies from calculating risks using basic tools to products that are recognised by international investors.

Das: Frankly, if you talk to investors and intermediaries they do not yet feel that everything is right. There are still con-cerns about the settlement infrastructure and there are still concerns about the level of custodian control. So the full quantum of the money that can come in is still not



invested. If you take asset managers or global custodians in Japan and Korea or in the west, there is still a fair bit of apprehen-sion about the way the markets operate, including the dual account structure and the challenges with the irrevocable rejec-tion process. Part of this is an education process.

We need to better articulate the improvements that have been made to the settlement process in the last few years, but there is still scope for improvement. The reassuring part is that the market authorities are open to feedback and are willing to change.

Ajay Kumar: MSCI classification and the process towards classification has recon-figured the region’s markets. The process towards classification helped restructure the settlement mechanism and opened up better foreign participation.

First, it is helping improve governance – companies have begun to realise that sophisticated investors will offer premium to companies with better governance and that will put others under pressure to improve disclosure norms. This benefits the market, as good disclosures will make bad policies difficult to conduct.

Second, the cost of trading comes down. For large fund managers such as us, impact cost is a source of performance drag. With larger foreign investors coming in the impact cost comes down.

Third, these markets had a homogene-ous set of investors that resulted in a herd mentality – the classification has brought some heterogeneity in investors, a wider spectrum of investors across liquidity and risk curve.

But this move is not without its risks – investors need to realise the paradigm has changed. The volatility has increased, correlations have shifted. When the global financial crisis took hold you suddenly saw a large amount of foreign institutional money moving out of this region. At this time it was not too much of a problem, fortunately, because foreign institutional investors were still not a very large portion of this market.

Now, going forward, that is going to be different. Investors will need to brace themselves for strong fund flows that may be independent of domestic considera-tions. Index providers meanwhile need to understand the market better when rebal-ancing – the recent experiences of both MSCI and S&P is a case in point.

What can investors expect from the prospect of the Saudi Arabian equity market opening to foreign investors next year?

“International asset management

companies are interested in

the region and particularly in uAE”

NIGEL SILLITOE, INSIGhT dISCOVERy

“when the outside world look at the uAE they don’t necessarily appreciate that there

are two distinct exchanges”

ROBERT ANSARI, mSCI



Das: When international investors come into this market, I think the biggest chal-lenge they will face is the shift to a short settlement cycle of T+0, which is very different from most developed and even emerging markets. While in China A shares has a somewhat similar settle-ment cycle – stock on T, cash on T+1 – the sheer size and attractiveness of the China market has drawn many international institutional investors.

However, many others have stayed out and MSCI has not included China A shares in its Emerging Markets Index. Thus a T+0 cycle will pose its own chal-lenges to foreign investors, but will not be a showstopper. The good thing is that we are now going through the consultation phase – although the consultation is more about the draft regulations on qualified foreign investors (QFI) rather than the clearing and settlement model. Practi-cally speaking, I think we will have to start with the current cycle of T+0 and move to a longer settlement cycle as we go along.

Izz-e-Hamid: The opening up of the Tad-awul to provide direct access will have a significant impact on the capital markets landscape. We understand that the regu-latory authorities in the kingdom have adopted a consultative approach towards opening of the market. The rule of thumb is that this is going to be a gradual and

phased process. The regulatory

authorities are aware of the standards that are in place in the regional markets and those that are in prac-tice internationally. The regulators would not want to disturb the local operating environment too much at the outset, and will ensure sta-bility is maintained as further steps are taken to open the market fully. Foreign portfolio flows, which analysts expect to be in the range of about $30bn-$50bn after

the market opens, will be closely linked to the addition of Saudi Arabia to the MSCI Index. Given the size and scale of the Saudi Arabian market, it is quite probable that they may make a direct entry to the Emerging Markets Index.

Das: The number doing the rounds is that

“we definitely

see a trend where some of the typical family offices in the uAE are maturing and

looking to list”

CLAuS NOuVEAu-

NIKOLAjSEN, AdS SECuRITIES

“Companies have begun to realise that

sophisticated investors will offer premium to companies with

better governance that will put others under pressure to improve”

AjAy KumAR, QATAR NATIONAL BANK


there is a potential opportunity of $50bn-plus worth of flows coming into the market in due course, as and when Saudi Arabia is included in the MSCI Emerging Markets Index. However, that will take time – an MSCI review can be initiated only in June 2015 for a decision regarding the upgrade in June 2016, for implementation in June 2017 – and a number of steps need to be taken to have enhanced clearing and set-tlement procedures, greater custodian control, and avoid prefunding and pre-validation before the market is upgraded.

However, the market opening and liberalisation is always an evolutionary process and we are privileged to have a very responsive regulator and stock exchange in Saudi Arabia – so we have no doubt that solutions will be found to any challenges in hand.

Izz-e-Hamid: The market opening, pos-sible inclusion in indices and increased foreign participation will benefit Saudi Arabia in the same manner that has been observed in other markets. There will be further improvements in corporate gov-ernance and the systemic infrastructure, elements that are of particular importance to foreign institutional investors.

The opening up of the market and the QFI regime shall bring to the fore the importance of the custodian function. The

introduction of the independent custody model (ICM) will be another significant development that will embed the role of a specialist custodian. With time there will be a wider array of tradable instruments and the introduction of a depository receipts, which are something that has been under consideration.

Shahrur: In my opinion, expectations will be shaped by the reaction of local inves-tors ahead of the actual implementation of the new regulations next year. We have already seen a sharp rally. If this is main-tained, then this will eat greatly into the case for Saudi Arabia from a valuation per-spective, though fundamentally this will remain a high growth, very solid market. If the rally subsides, then foreign inves-tors will have more space to participate in some of the strength and diversification potential offered by the market.

Sillitoe: The other point is access of asset management companies. I think the Capi-tal Market Authority (CMA) will have to set up some sort of education programme to make it easier for external investors.

A lot of our research is showing that for international asset management compa-nies the big topic now is obviously Saudi Arabia – not just about trying to access the capital markets but obviously to look at

how you can raise capital to use there. But obviously that often now involves having to have the relevant licence or partnership with a CMA licensed business.

Then there is the practical point about visits – the Saudi Arabian government will have to look at easing the rules for visas because if you are a fund management company from New York hoping to ana-lyse some of these companies, the current process is very difficult.

What does Saudi Arabia offer that investors cannot get elsewhere in the region?

Shahrur: The size and prospects of Saudi Arabia’s consumer sector are very good. There is a big investment theme regionally around domestic consumer demand, but there are a very limited number of liquid companies in this sector elsewhere in the region – maybe around 10 names. So if you want to gain exposure to that sector, you can almost strictly achieve that in Saudi Arabia where you have a good number of listed companies that are liquid. Also, apart from its fundamentals, this sector exhibits a lower correlation with interna-tional markets than other big sectors in the region.

So, for someone sitting in New York, petrochemical companies may be inter-



esting but they are highly correlated with international markets. But for a food busi-ness in Saudi Arabia for example, the low correlation means you can diversify your risk while giving you a good exposure to a growing regional sector.

What are the prospects for the initial public offering (IPO) market in the region?

Claus Nouveau-Nikolajsen: From the merchant banking side, we definitely see a trend where some of the typical family offices in the UAE are maturing and look-ing to list. We have perhaps 14 or 15 offices that are considering this currently. This all means that they are opening up and con-sidering in more detail the governance they need to be able to warehouse inside the group and the family for a listing to work. I think the first family IPO that is going to be interesting is this year’s launch due to happen out of Dubai Al Habtoor.

From a UAE point of view, this is a key move because it will open up the doors for many others. It was a shame there was a slight delay in the process earlier this year – I think it created some negative impact on some other families that were trying to follow on and IPO themselves. Then you have the whole institutional side of the market. Here there is a long waiting list for companies, with structures to go IPO and this is certainly good from a global invest-ment point of view.

The danger is that if there are set backs – such as the one we have seen this year – the result can be a lot of concern for those waiting to IPO. I think there needs to be a big emphasis on edu-cation about what happens when firms IPO – you can change shareholder structures, you can buy out, you can sell out, but you have to do it in the proper way.

Ansari: I think Claus [Nouveau-Nikolaj-sen] has a good point when he focuses on education and it is relevant to the range of structures that can be offered. The point is that the predominant type of investor in this region is the retail investor. In Saudi Arabia the retail investor is approximately 95% of the market. They have two types of asset to invest in basically – real estate and equities. Before investors look at new types of products and investment vehicles

“The size and prospects of

Saudi Arabia’s consumer

sector are very good”

huSAyN ShAhRuR,

NBK CApITAL

“we understand that the regulatory

authorities in the kingdom have adopted a consultative

approach towards opening of the

market” hAmmAd IZZ-E-hAmId,

dEuTSChE BANK



they need to understand the benefits of these alternative routes to get exposure.

Shahrur: At the origin of this is that a number of the IPOs in the region are gov-ernment assets, and are done with the intention to redistribute these assets or wealth to the public. Also, many of these companies fall within subsidised indus-tries with lower energy and feedstock costs, like the case for the petrochemi-cals and cement sectors in Saudi Arabia. So, one way to have everybody benefiting from the subsidy is to intentionally offer the IPO to nationals at a price significantly below the theoretical fair price. We have seen these IPOs usually rally by 100% on the day of issuance.

By contrast, a family business that is not benefiting from any subsidy finds it hard to compete with the steep discounts offered by these IPOs in order to attract potential investors. A related factor that prevents these families from listing is that they are not clear what options exist regarding what they can do with the money they will potentially raise. Also, a lack of integrated regional markets impedes cross-border investment and limits investment oppor-tunities. For example, a UAE company that wants to grow to other markets within the region – not even globally – faces so many obstacles.

Moreover, regulations in some markets are quite inhibitive – the Dubai Finan-cial Market (DFM) comes to mind in this respect. Similarly, private equity funds, for reasons largely related to pricing and reg-ulation, have shied away from IPO exits.

Kumar: With valuations and liquidity where they are, it is probably the ideal time to IPO now. When you look at Qatar, the government has announced IPOs of about $50bn over the next five years, it is about $10bn per year, and for a market of this size it looks very attractive and useful.

The problem with IPOs that are part of a government unbundling of assets is that it is saddled with restrictions that prevent fair price and symmetry. It is fair for gov-ernments to unbundle assets to its citizens at a discount, it is both good and desira-ble, however after it is listed it should be allowed to be freely traded so that its true value may be realised and the benefit of listing is enjoyed by all the stakeholders in the capital market.

When it comes to the family houses, I agree with the argument that the govern-ance is bad and that is one of the reasons holding it back. There has not been much success in terms of the free float these companies have enjoyed since listing. The second factor is that most family houses

business are floated as conglomerates that have five or 10 different kinds of busi-nesses in them.

When you put a lot of small businesses all bundled up together this way and then offered, there is no business model per se that investors can look at. It is hard to be confident of the management’s capability to oversee 10 different businesses given its governance track record.

How do you evaluate the political risk of investing in the Middle East? Has the importance to investors of political risk changed?

Das: This region is no stranger to political turbulence – sometimes there is more of it, sometimes there is less. The problems recently in Iran and Syria have not hit the markets in UAE or Qatar as much as they might have done. The focus this time has been on issues directly affecting the spe-cific country being traded, not necessarily around what happens around the periph-ery. And the Middle East is not the only place with political risk – just look at the European situation or what is happening

in Ukraine. We are not living in an oasis of calm.

Kumar: Politics will become more impor-tant as foreign investor stakes in these markets increase. The perception of risk in, say, Qatar is different I think for a fund manager sitting in New York sev-eral thousand miles away from a domestic institution. He is probably more sensitive to it – if the market is largely domes-tic, which is the case for Saudi Arabia or Qatar, the risk is probably not considered as high as when foreign investors become a dominant force in the market.

Does a Dubai-Abu Dhabi Bourse merger make sense?

Ansari: There have been comments in the press about combining the back offices of the Abu Dhabi Exchange and the DFM, with the front offices still functioning sep-arately. When the outside world looks at the UAE it do not necessarily appreciate that there are two distinct exchanges and if it does not necessarily impact interna-tional investor habits with the respect to

“Inflow into has been far higher than what analysts expected. In the period may to june, we saw assets in our custody increase by

more than $3.5bn” ARINdAm dAS, hSBC


the market one could argue to keep them as they are.

Claus: A certain amount of liquidity needs to come back to the market, and the merger between the two exchanges would facilitate that. I see it as part of this wider theme of market maturity. There is much more these exchanges can bring to the market and I think they should start being more open about how they are working.

Izz-e-Hamid: The merger of the two exchanges may be an important develop-ment in itself. However, what is perhaps more pressing in terms of need is the har-monisation of practices and procedures at an operating level. Standardisation, – for example, across administrative tasks such as investor registration – may ease of mar-ket entry to foreign investors and avoid the duplication of efforts. Further, alignment of the framework for regulations and set-tlement processes may bode well for all market participants. In terms of our work-ing experience, the regulatory authorities are mindful of the reforms that will bring about synergies and add scalability, aimed to make it easier for investors and inter-mediaries to operate across the markets.

Qatar has said it needs $220bn of investment for the World Cup. Are

investors keen to provide it and will they be adequately rewarded for the risk they take on?

Claus: Qatar does need quite a lot of capi-tal. The government commitments will ultimately be more than sufficient to meet it but there will be some private sector participation. However, when you look at the question of whether investors are actu-ally being rewarded for taking on this risk I think the general point is no. The UAE, which is probably the largest borrower in the region, has seen its spreads narrow from 500bps [over treasuries] to around 150bps. Absolute rates, at about 4%, are the lowest since 1960.

So when you look at all this you have to say that now you have so much liquidity being pumped into the market and spread figures that are consistently dipping over the years. So, no, I do not believe that investors have been adequately rewarded for the risk they are taking on.

Is participation by foreign asset manag-ers in the Middle East increasing?

Sillitoe: International asset management companies are interested in the region and particularly in UAE. One question frequently asked is: “Which is the finan-cial centre of the Middle East. Dubai?

Abu Dhabi? Bahrain? Saudi Arabia?” In Dubai, I am still staggered by how many companies are either setting up here for the first time or are expanding their oper-ations. If you look at every global asset management company that is physically in the GCC region, there are only five that are not represented in Dubai. That is quite a staggering statistic.

It is also worth bearing in mind that every GCC jurisdiction has a slightly dif-ferent appeal to businesses and that each jurisdiction itself has different priorities about what the type of business and invest-ment it is looking to attract. In Qatar, for example, the government is providing a regulatory framework and incentives to hedge fund managers to set up there. Qatar is also the only regulatory author-ity which has so far introduced mandatory commission disclosure by retail financial intermediaries.

Across the region we are seeing posi-tive signs that regulatory standards are being raised. Lessons are being learned from current regulation and legislation in what might be perceived as more mature markets of the US, Australia and Europe. As the financial markets of the Middle East develop, individual governments are making it clear that they will not be left behind when it comes to good governance processes. g



GLOBAL CuSTOdIAN

CitiTechnology is at the centre of its strategy to deliver to clients

The core focus of Citi’s Mena global custody solution over the last two years has been on the development and build-out of its dedicated Middle East global window, where assets under cus-tody have exceeded $2bn and are expected to exceed $3bn by the end of 2014.

This global custody window is designed to focus on Middle East-based clients investing into Mena markets. It covers the working hours/week of the Middle East for the securities markets and associated treasury functions required to support investors focusing on the region with local delivery.

Other developments during 2014 include the development and roll-out of the Auto-FX Global Custody FX solution and EMC, a corporate action and income integrated solution. Citi is also expanding its branch network, adding Bahrain, Kuwait and the UAE in recent years with the expectation that Qatar will be added in 2014. It also has plans to open in Jordan, Saudi Arabia and Iraq.

Citi’s Middle East global custody solution features a single con-

tractual structure via Citi UAE, Middle East-based relationship manager and client executive and customer services, UAE-based product management, GCC-based centralised operations covering settlements, corporate actions, income, tax and other operations roles, Arabic-speaking customer service representa-tives, GCC-based coverage including Sunday and GCC holidays, and advanced cut-off times.

Technology for service delivery remains at the forefront of Citi’s strategy. Its investor services global custody solutions in the Mid-dle East have further integrated the delivery of global custody, for regional and global markets, with cash management and treas-ury capabilities through a single onshore entity domiciled in the UAE. This service provides clients with a single point of contact for all their custody, asset servicing and wider banking needs.

Citi combines local client service with locally-based product platforms and operations to provide an offering that is sensitive to market-cut-off times, the regional working week and local cus-tom. It also provides shariah-compliant cash solutions to service the needs of its Islamic client base. Citi’s Auto-FX product pro-vides clients with significant capabilities for the automation of FX transactions with competitive spreads, real time pricing and automated settlement.

SuB-CuSTOdIAN

HSBChSBC has been engaged with multiple regulators to improve rules and processes

HSBC has assisted the smooth transition of the UAE and Qatar markets into MSCI Emerging Markets status through a number of initiatives. These include enhanced processing capabilities and increasing its guarantee at exchanges, settlement lines for clients and offshore and onshore resources. HSBC also led local working groups that included the exchanges, depository and brokers to create awareness, engaged with clients before, during and after the upgrade to ensure awareness of local processes and latest markets developments and worked with the central depositories to improve timelines for account opening and the waiver of pen-alties during the conversion week.

HSBC Qatar’s engagement with the Qatar Exchange led to the implementation of the direct dividend credit process to share-holders’ cash accounts. At least 90% of the companies in Qatar now opt to pay dividends via wire transfer, thereby providing clients with the early use of funds. HSBC was engaged with the UAE’s regulators ahead of its decision to introduce a law to pro-vide clients with the ability to sell their rights. Kuwait Clearing Company agreed to HSBC Kuwait’s initiative to pay dividends electronically rather than by cheque. Once this process is imple-mented, it will help clients receive their entitlements in a more timely fashion.

HSBC extension of the existing multi-managed fund operat-ing model to cover multiple global custodians on top of multiple fund managers has helped investors achieve efficient settlement by enabling multiple global custodians to instruct on behalf of several fund managers trading on the same national investor number.

Assets have grown by approximately 50% since 2013 and there has been growth of more than 40% in transaction volume. HSBC won more than 30 custody mandate across nine countries between June 2013 and June 2014 and despite volume peaks from 2013 – average 2000% in Qatar and 1600% in UAE – was able to handle, without any disruptions in service delivery or operational flows, the MSCI upgrade for both countries.

Product innovations include Account Tracker, a tool to manage and track account opening documentation processing and status. In November 2013 HSBC implemented the 2013 Swift standard release and it has also improved its market information portal to enable comparison of market features side-by-side and enhance the market holiday calendar.

HSBC Oman provided feedback to Muscat Central Deposi-tory about implementing the new depository system and the introduction of delivery-versus-payment (DVP) and is working with the Egyptian Depository to enhance a proposed DVP model across the whole market, which is expected to be launched before the year end.



FuNd AdmINISTRATOR

Deutsche BankThe bank actively supported the regulator’s consultations as is expanding its GCC footprint

Deutsche Bank provided support to clients during high vol-umes of new fund launches last year, as the UAE market saw a turnaround in activity. It brought on board one of the major local fund houses and provided support to change its domicile, to increase international transparency. The bank has a solid global solution in its diversified funds platform, with automated and standardised reporting. It says its effective hires of key person-nel, investment in systems and progressive rollout of value-added services differentiates it from its competitors. During the year to June 2014, Deutsche Bank said it focused on ensuring that the clients expectations were met, primarily assisting existing clients launch funds.

During the past year Deutsche Bank’s investor services divi-sion has partnered with various other divisions within the bank to offer a combined service to clients, allowing them to eliminate risks and avoid the traditional pitfalls in the industry. To ensure

stable delivery to clients, it provides a dedicated account man-ager and a back-up manager who remain with the client, from pre-contract, for day-to-day basis communication. The bank also provides regular services calls and weekend support to ensure smooth settlement.

The bank provides regular feedback to the regulators on consultation papers, to assist in development of local funds. Post-reclassification of the UAE to MSCI emerging market sta-tus, Deutsche Bank’s investor services division provided valuable feedback to the Securities & Commodities Authority (SCA), based on investor communication and next possible steps, in order to form a key foundation for the next goal. Deutsche Bank has now applied for its fund administration license under the new SCA rule.

Deutsche Bank continues to push its boundaries. The much anticipated Saudi Arabian market opening is expected in early 2015. Deutsche Bank will ensure that its position in the market is useful for clients. It is in the process of applying for direct license in Qatar, which with Saudi Arabia and UAE already in its portfo-lio takes the bank’s coverage of the GCC up to 80%.

GCC FINANCIAL CENTRE

DIFCThe dubai International Financial Centre continues its strong growth with record business figures

The Dubai International Financial Centre (DIFC) is in a strong position as it prepares to celebrate its tenth anniversary in November, with growth at its highest since the financial crisis.

Last year the DIFC reported record business figures, with a 14% rise in the number of companies registered at the centre to 1,039. Of these, 55 new additions were financial services firms including BLME, Wells Fargo, Carnegie Asset Management and Samena. More recently, in April AlKhair Capital became the first Saudi Arabian investment institution to receive a licence to oper-ate from the DIFC. The centre has gone from strength to strength with membership including 22 of the world’s top 30 banks, 11 of the world’s top 20 money managers, six of the top 10 insur-ance companies, and seven of the top 10 legal firms, solidifying its reputation as a prestigious and highly sought after business community.

DIFC’s increasingly diverse geographical mix of clients is rein-forcing its growing reputation as an important gateway between East and West. The centre currently hosts regulated firms from across the globe, including 34% from Europe, 29% from the Mid-dle East, 15% from North America, 12% from Asia, and 10% from the rest of the world.

Companies based in the DIFC continue to benefit from the cen-tre’s internationally recognised regulatory and legal framework. There were several regulatory developments in 2013, such as the

introduction of a framework for institutions to develop sharia-compliant products and services. In December 2013, Sheikh Mohammed bin Rashid Al Maktoum, the vice-president and prime minister of the UAE, enacted the amendment of several DIFC laws and regulations in order to comply with the require-ments set out by the OECD Global Forum on Transparency and the Exchange of Information for Tax Purposes and align the arbi-tration law to the New York Convention.

In 2014 the DIFC focussed on the development of new markets including Islamic finance, capital markets and growth markets such as Africa, providing additional business opportunities to firms based both within DIFC and the wider region, continuing with its ambition of making Dubai the premier financial market place in the Arabian Gulf.

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This advertisement has been approved and/or communicated by Deutsche Bank AG or by its subsidiaries and/ or affiliates (“DB”) and appears as a matter of record only. Without limitation, this advertisement does not constitute an offer or a recommendation to enter into any transaction. The offer of any services and/or securities in any jurisdiction by Deutsche Bank AG or by its subsidiaries and/or affiliates will be made in accordance with appropriate local legislation and regulation. Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervisory Authority) and by the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. Investments are subject to investment risk, including market fluctuations, regulatory change, counterparty risk, possible delays in repayment and loss of income and principal invested. © Copyright Deutsche Bank 2014.



TRANSITION mANAGER

CitiCommitment to local presence pays dividends for clients

While some of its competitors have closed or scaled back their transition management services, Citi’s transition management team (CitiTM) has continued to advance its footprint and market share in the Middle East over the past 12 months, winning new clients and completing a record number of transition events in the region.

A notable success during 2014 has been its advisory busi-ness, where it has helped several clients throughout the Middle East transition their portfolios from external managers to in-house management. These transitions have involved providing guidance and advice on how to set up the internal portfolio man-agement capabilities, systems, trading links, risk management and compliance functions. Its advice covers both infrastructure and personnel requirements.

Another positive development this year has been the expan-sion of the portfolio solutions business, which includes a service that allows clients to reduce the management costs and maxim-ise stock lending revenues from legacy portfolios before they are transitioned. As interim manager, CitiTM takes on the respon-sibility for managing the portfolio from a legacy manager, on a

non-discretionary basis, thereby allowing clients more time to select a new manager without incurring additional costs.

Effective communication makes a significant difference to cli-ents in the Middle East. Whether a transition is perceived as a success often depends on how well the project was explained and communicated locally, but the geographical distance between clients and their transition providers, language barriers, cultural differences, different time zones and different working days/hours can make effective communication challenging.

CitiTM believes there is no substitute for having a team member present in the client office throughout the duration of an assign-ment. This team member is able to communicate throughout the client organisation and to bridge local and cultural differences to ensure complex transition management events are better under-stood by all local stakeholders.

CitiTM is one of the few remaining providers to have a truly global presence with dedicated transition specialists located in London (Emea), New York (Americas) and Sydney (Asia Pacific). It has been providing extensive transition services to global insti-tutional investors since 1989 and a full project management service to a broader client base embracing plan sponsors, pension funds and insurance groups since 1994. The three local offices have full access to the Citi franchise, which has trading desks in more than 80 countries.

mENA FINANCIAL CENTRE

Casablanca Finance City AuthorityCasablanca Finance City continues to introduce new initiatives

The rising number of registered companies is evidence that cor-porations around the world consider Casablanca and Casablanca Finance City (CFC) a gateway for their regional activities, boosted by the most recent GFCI ranking in which Casablanca is ranked the second most important financial centre in Africa.

During the last 12 months, 36 companies have decided to oper-ate their African activities from Casablanca, including industry leaders such as BNP Paribas, AIG, Clifford Chance, PwC, Coface, Accor and Vivo Energy. The African Development Bank (AfDB) has decided to set up the Africa50 Infrastructure Fund in Casa-blanca Finance City, which will have $3bn of initial capital and will raise up to $100bn over the next decade.

CFC has also been strongly involved over the last 12 months in the development and harmonisation of the Moroccan finan-cial sector in line with best international standards. It has played a key role in setting up a new securities lending and borrowing mechanism in the Moroccan market; enlarging the list of eligible assets to securitise and opening the securitisation mechanism to international participants; and setting up the possibility of listing

foreign companies on the Casablanca Stock Exchange.Other achievements include the opening of examination and

training centres for CFA (Chartered Financial Analyst Institute) and CISI (Chartered Institute for Securities & Investment) certi-fications in Casablanca.

Financial institutions and multinational corporations have been attracted by numerous factors including an integrated eco-system, attractive tax incentives and a major real estate project with a dedicated area of 100ha in the heart of Casablanca.

CFC has enabled companies to overcome bureaucracy and operational hurdles by providing administrative fast tracks, streamlined application processes allowing for free flow of people and no restrictions in dealing with foreign currencies.

In the area of mediation and arbitration, CFC has launched an international mediation and arbitration centre with new institu-tional rules and arbitration law. To mark this, CFC has decided to establish Casablanca Arbitration Days, which will be held every autumn with the first one taking place on November 28-29 2014.

In addition, an educational Masters programme, with aca-demic content developed by CFC in partnership with experts from Columbia University and two of the most prestigious engi-neering schools in Morocco, aims to provide CFC companies with a qualified talent pool.

© 2014 Citigroup Inc. All rights reserved. Citi and Arc Design is a registered service mark of Citigroup Inc.

Planning your move

Making it happen

It’s reducing cost and risk to preserve asset value. It’s factoring local market knowledge into your execution strategy, utilising trading desks in over 80 countries. It’s managing every detail in complex projects, from planning to execution and settlement, across all asset classes.

Around the world, it’s seeing opportunities through — every day.

>> Transition Management

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EMEA: +44 (0) 20 7986 2531



CONSuLTANCy

Insight DiscoveryTimely surveys and studies have driven industry debate this yearInsight Discovery produces high-quality, cutting-edge research reports that have consistently generated actionable market intelligence for both asset management and international life companies.

Over the past 12 months, it has produced in-depth research reports which give readers access to key decision makers, from policy makers to the distributors of funds. The challenging sub-jects covered range from Beyond End of Service Benefit to Lifting the lid off the mysterious world of private banking and Investor attitudes of NRIs to a study of financial advisors’ preferred asset classes and strategies.

These studies have received extensive media attention and helped to drive debate within the industry. In addition Insight Discovery’s databases – which cover all the key distribution channels including SWFs, private banks, commercial banks and financial advisory firms – are impressively extensive and up to date.

Insight Discovery has also had a highly successful year in the commercial intelligence industry. It has been hired by more than

a dozen leading international asset management companies, as well as having conducted research for every international life company, bar one, active in the Middle East, according to the firm.

The Middle East Investment Panorama, an annual survey in its fifth year covering how the services of international life com-panies and international asset managers are actually used by advisers in the six Gulf Cooperation Council (GCC) countries has attracted a record number of partners. As a result of the success of the survey, Insight Discovery has now begun syndicated research into two new markets, sub-Saharan Africa and South Africa.

The research firm has a track record for innovation, including a successful and timely survey on Dubai that was launched within 24 hours of the emirate being announced as the winning host of the World Expo 2020. The survey attracted responses from over 1,000 United Arab Emirates residents and the results were pub-lished within one month. Backers of this project included Zurich Insurance Group and the DIFC and the survey was widely rec-ognised by the press. The firm says it remains the only research company in the Middle East dedicated to supporting the asset management industry.

EXChANGE

Nasdaq DubaiThe exchange landed major listings and traded value leapt 88% and

Nasdaq Dubai’s many successes in a busy year have marked it out as the leading exchange in the region. Traded value on the exchange year-on-year leapt 88% in the year ended June 2014 and it secured a number of high profile equities listings. The exchange also ranked first in the Middle East, and third in the world, for sukuk listed value of $18.3bn as at June 2014.

In equities listings, Bank of London and The Middle East, Europe’s largest Islamic bank, listed on the exchange in October 2013. This was a highly unusual example of a European company choosing a Middle Eastern exchange for its sole listing. Also, Nas-daq Dubai listed Emirates REIT in Dubai’s first IPO for more than five years and the first ever real estate investment trust to list on a GCC exchange, in April 2014.

Nasdaq Dubai listed 19 sukuk valued at $11.5bn, helping to turn Dubai into a global leader for Islamic bond activity. The exchange proved its broad appeal to international issuers as six sukuk list-ings were from Islamic Development Bank, which is owned by 53 countries. The exchange also launched a pilot scheme for sukuk and conventional bond trading.

The exchange, together with Emirates Islamic bank, also launched a murabaha Islamic financing platform. This makes use of certificates based on wakala investments, rather than making

use of commodities. The platform grew rapidly, achieving more than AED3bn ($82m) of financing by June 2014.

Reuters reported due to the murabaha platform: “Dubai will compete with London for a share of Islamic banks’ liquidity man-agement business,” in a reference to hedging the London Metals Exchange.

Nasdaq Dubai offers issuers access to investors from all over the world, with excellent visibility, and does so within a strong regulatory framework inside the DIFC. This makes the exchange a springboard for a company to expand in international markets, while also developing its UAE and regional presence.

Its broker membership comprises a number of the world’s larger investment banks, plus most of the UAE’s leading brokers. No other exchange provides this combination of international and regional investor wealth, according to the firm.

Nasdaq Dubai provides a number of advantages to the com-panies that are seeking an initial public offering, including the freedom to choose the price at which they sell their shares, through bookbuilding.

Companies can also sell as little as 25% of their total capi-talisation, allowing owners to keep control. In addition, Nasdaq Dubai Academy runs training courses that reflect the exchange’s mandate to promote capital markets best practices in the region, ranging from compliance and anti-money laundering to deriva-tives and Islamic finance.


| sAUdi ArABiA

Six years after they were first allowed access to the largest and most liquid market in the Arab world, foreign investors have reacted positively to Saudi Ara-

bia’s plans to remove barriers to overseas investment.

Much has changed since Saudi Arabia implemented swap arrangements as a mechanism for indirect foreign invest-ment in its stock market (Tadawul) in 2008. While most of the rest of the world has struggled to recover from the global financial crisis, the kingdom has gradu-ally moved towards liberalisation by promoting better corporate governance and aligning its working days with regional

and international markets.In August, Saudi Arabia’s Capital Mar-

ket Authority (CMA) published the draft rules for qualified foreign financial insti-tution, or qualified foreign investor (QFI), investment in listed shares, and invited comments and observations on the pro-posals for a period of 90 days. The details of the draft rules are set out in the box on the right.

The CMA says it will review all responses to these draft rules by the end of this year. While suggesting that the changes would take place “according to the time it sees fit”, it also stated that the rules would take effect during the first half of 2015.

The initial reaction from foreign inves-

draft rules for qualified foreign financial institutions investment in listed shares

CoverageAll the market participants apart from the citizens of the Gulf Cooperation Council area are considered foreign investors.

Eligibility• Theapplicantmustbeabank,

brokerageandsecuritiesfirm,fund manager or an insurance companylicensedorregulatedbyan authority equivalent to the CmA oracceptabletoit.

• Theapplicantmusthaveminimumassets under management of SAR18.75bn($5bn).TheCMAmayreduce this minimum requirement toSAR11.25bn–thisincludesassetsheldbytheapplicantor its group for the purpose of investment,andassetsmanagedbytheapplicantoritsgroup.

• Theapplicantoranyofitsaffiliatesmusthavebeenengagedin activities related to securities and investment for a minimum of fiveyears.

Investment limit• EachQFI,togetherwithits

affiliates,oreachapprovedclienttogetherwithitsaffiliatesmayownamaximumof5%ofanyissuer’s shares.

• Themaximumownershipofallforeigninvestors–inallcategories,whetherresidentsornon-residents–inaggregateis49%ofanyissuer,includinginterestsunderswaps.

• ThemaximumownershipinanyissuerbyQFIsandapprovedQFIclientsis20%.

• TheoverallownershiplimitforQFIsandapprovedQFIclientsinaggregateis10%bymarketvalue,including any interests under swaps.

• Theownershiplimitswillbesubjecttootherlegislativelimitationsonforeignownershipinjointstockcompaniesandthelimitations set forth in the articles ofassociationorbylawsofthelisted companies.

Welcome at lastSaudi Arabia’s long-awaited announcement that it will allow foreign investors to directly own listed shares has caused excitement in the markets. Paul Golden investigates

Riyadh


sAUdi ArABiA |

tors has been positive. While the swap arrangements by which foreign inves-tors currently access the Tadawul are cumbersome and more expensive than direct ownership, the value of shares bought by foreign investors through such arrangements more than doubled in July compared with the previous month from SAR1.66bn ($443m) to SAR3.53bn.

This increase is significant given the shorter trading period in July as a result of the Eid holiday and the fact that the overall value of trading on the exchange was down by almost one third compared to June.

According to Al Rajhi Capital CEO Gaurav Shah, allowing direct foreign own-ership was always more of a timing issue than any lack of intent, although he feels that MSCI’s recent decision to upgrade Qatar and the UAE to emerging market status might have accelerated the process.

“According to MSCI, the Saudi market would represent more than 60% of the Frontier Market Index or 4% of the Emerg-ing Market Index based on current data. We are of the view that the Saudi market is likely to be included in the emerging mar-ket index considering its significance and the status of Qatar and the UAE.”

Despite its absence from MSCI indices, frontier funds have been taking off-bench-mark positions in Saudi Arabia, attracted not just by its natural resources but also

its current account and capital account surpluses, youthful demographics and dollar-pegged currency.

The Tadawul All Share Index consists of more than 160 companies with a total market cap of $516bn and an average daily trading volume of $2bn over the past three months, which is on a par with Russia and South Africa and higher than Turkey, Indonesia or Mexico, explains Julie Dick-son, Ashmore equities portfolio manager.

“Saudi companies offer a rich universe of investment opportunities, from banks to consumer-driven businesses. As they have long been off investor radars due to index exclusion and lack of direct invest-ment access, their valuations have been trading at a discount – at times a signifi-cant one – to their peers in other markets. As markets react to this news and foreign investors eventually start tapping into this new investment destination, we expect the gap to close.”

Oil illusionSome investors expect that by investing in the Middle East they will be exposed to falling oil prices, but there are no listed oil companies in region, she continues. “As a whole, energy stocks make up just 2% of the region’s equity markets and these are primarily exploration and production companies with resources or concessions outside their domicile.”

Though there is a limited valuation gap between the Saudi market and other emerging markets to take advantage of in the short term, Shah says the Saudi market more importantly offers healthy risk-adjusted returns over the long term. He believes the opening up of the capital market will lead to improved institutional participation, transparency and disclosure practices, increased focus on fundamental themes and drivers and better access to long term capital, while reducing overall volatility in the market in the long term.

“In addition, better market access should lower the implied risk premium for the market, leading to a lower cost of equity and rerating of valuation multiples. It should also encourage listing of more privately held companies.”

Shah believes the effect of the lower risk perception and rerating are partly behind the Tadawul’s strong performance fol-lowing the announcement. “Our research team had previously assumed a 1% addi-tional risk premium for the Saudi market due to its limited access and other factors. However, with this development, they have reduced this risk premium by 0.5% due to the expected improved integration with the global markets.”

He also feels that the focus will be on

large market cap companies as they will have higher weights in indices once the market opens up and is included in global benchmarks.

Henri Chaoul, chief strategy officer at Alkhabeer Capital, says oversubscribed initial public offerings (IPOs) are tes-timony to how attractive the market is, despite the political and social instability in the region.

Shah describes the number of IPOs lined up as one of the factors that should offset concerns over the proposed 10% overall limit for foreign investors, alongside the total market value and the investment potential and observes that total foreign ownership in Gulf Cooperation Council (GCC) markets – Qatar and Abu Dhabi – is still below 10%, although ownership in individual stocks is above 20% in some cases.

Retail investors account for about 85% of trading in Saudi Arabia, although their ownership is only about one-third of the market. According to Shah, the key risk factor is a possible increase in speculative activities by local investors leading up to the actual opening up of the market to for-eigners, which may push stock valuations above their fair values.

Slim Feriani, chief investment officer and CEO of Advance Emerging Capital, warns that while foreign investor partici-pation is likely to increase significantly,

“The Saudi market is likely to be included in the (mSCI)

emerging market index considering its significance

and the status of Qatar and the uAE”

GAuRAV ShAh, AL RAjhI CApITAL

“Brokers with an international client base will likely be the

main beneficiaries, especially if they have local brokerage

licences” OLIVER SChuTZmANN,

ShuAA CApITAL

GLOBAL INVESTOR/ISF mIddLE EAST AwARdS 2014 37 www.GLOBALINVESTORmAGAZINE.COm

the Saudi market does not move quickly and this increase is likely to occur over years rather than months. “The new set of rules mirrors the policy guidelines issued by the CMA in 2011. Unlike its regional peers in Qatar and the UAE, the CMA has been exceptionally slow in its decision-making process.”

He says local, regional and interna-tional firms will add to their existing resources once visibility regarding the timing of “proper” opening up of the market improves. “A number of local and international investment banks have been active in the Gulf region, including Saudi Arabia, for several years. The Saudi Ara-bian market is likely to represent a bigger opportunity for international names because, as usual, asset managers remain of the view that size matters.”

Tariq Qaqish, deputy head of asset man-agement at Al Mal Capital is confident that the Tadawul is fully prepared for increased trading volumes having been monitoring and investing in the Saudi market over the past 12 years without “any serious issues”.

“I am sure that most of the brokerage firms are getting ready to capture new business. I would assume that interna-tional entities that have access to the trading floor will benefit the most as foreign institutions favour dealing with international brokers. With the UAE and Qatar upgraded to emerging status by MSCI, we expect the whole region to

benefit as it will be more feasible for inter-national players to put more resources to the region.”

Around 50% of trading volume is controlled by local brokers, but Qaqish expects the balance to shift towards inter-national players such as HSBC, Samba, Saudi Fransi and Saudi Hollandi.

In terms of investment opportunities, he favours the banking sector due to future growth expectations and valuations. “The market has gone up more than 15% since the announcement and 30% year-to-date. While we believe in the long-run story of the Saudi economy, valuations at this stage are becoming stretched.”

The CMA’s announcement is widely regarded as a positive step for Saudi Ara-bia and for the wider region as it may trigger a positive spill-over effect of for-eign investment into other GCC markets, according to Oliver Schutzmann, head of investor relations at Shuaa Capital.

“For many market participants it is business as usual since they have already been servicing their clients with research and corporate access for many years. Bro-kers with an international client base will likely be the main beneficiaries, especially if they have local brokerage licences.”

The underlying demographics of Saudi Arabia form a very attractive demand base for a range of companies from different sectors operating in the country, he adds.

“The Saudi government tends to allocate a large portion of its budget to improving the social infrastructure of the country and therefore key sectors that are likely to continue to see strong growth include education, healthcare and property devel-opment. Companies operating in these sectors are expected to see increased inter-est from foreign investors.”

Ownership obstacleIndex managers have previously identi-fied the lack of foreign ownership as a key obstacle to the inclusion of Tadawul in global indices, so Schutzmann expects the opening up of the market to improve Saudi Arabia’s chance of being added to the MSCI Emerging Markets index in the medium to long term.

This view is shared by Aranca CEO Hemendra Aran, who credits the CMA with introducing reforms to place the Tad-awul on a par with international standards such as changing its working days and tightening regulation on loss-making companies.

According to Aran, liberalisation will make Saudi Arabia’s capital market much more efficient, which in turn will help the private sector raise money to fund growth and assist the government in divesting

stakes in state-owned companies.“These steps are in line with the king-

dom’s continued focus on diversifying its economy and will boost non-oil sec-tors like infrastructure, banking and real estate. Foreign fund flows will propel listed firms to adopt best practices with respect to disclosure and financial methodology, add significantly to overall market activity and provide long-term fair valuations. All this will encourage more firms to list on the Tadawul.”

He says Saudi Arabia has come a long way in terms of providing an efficient trading architecture that can absorb a sig-nificant jump in trading volumes. “Saudi trading activity has more than doubled from where it was last year. While there is not yet any data in relation to whether firms have increased local resources or headcount, given the increased flow as well as increasing proportion of foreign institutional investors we expect local brokers to invest more in sophisticated technologies as well as enhance the qual-ity of research offerings.”

Aran reckons the CMA’s announce-ment is good news for both local and western banks and investment houses. “The Saudi market is dominated by local brokerages with the top 10 accounting for nearly 90% and the top three local banks sharing nearly 50% of business,” he concludes. “Therefore, the key lies in the relationships local brokers have with foreign fund houses and investors. On-the-ground knowledge is vital, especially when it comes to access to corporates and management of target companies.” g

“unlike its regional peers in Qatar and the uAE, the CmA has

been exceptionally slow in its decision-making process”

SLIm FERIANI, AdVANCE EmERGING CApITAL


| MIDDLE EAST AWARDS 2014

ASSET mANAGER – SAudI ARABIA

Al Rajhi CapitalAl Rajhi Capital benefits from sharia-compliant funds development

Al Rajhi Capital is one of the largest Islamic fund managers in Saudi Arabia, managing $7.26bn as of June 2014. It offers prod-ucts and investment solutions across a gamut of risk-return spectrums and is ranked fourth in terms of mutual fund assets under management (AuM) in Saudi Arabia.

Headquartered in Riyadh, Al Rajhi Capital is regulated by Saudi Arabia’s Capital Market Authority and is the investment banking subsidiary of Al Rajhi Bank. The parent firm is one of the largest Islamic banks in the world and operates regionally from 20 offices across the Saudi Arabia, employing more than 300 investment professionals.

Al Rajhi Capital manages funds for institutional, high net worth and retail clients though a team of experienced and quali-fied portfolio managers with diverse experience and track records of managing assets in multiple markets, according to the firm. The investment theme has been built on fundamental analysis combined with building expectations based on the changing macro environment for each asset class.

Al Rajhi Capital mutual funds outperformed broad market indicators and their respective benchmarks in 2013, recording AuM growth of 53% over the past 24 months compared to the average asset growth rate of 33%.

The investment bank offers a wide range of sharia-compliant investment products across all major asset classes and invest-ment styles. Funds offered include commodity mudaraba, equities (local, GCC, Mena and international), multi-asset, real estate, private equity and discretionary portfolios.

Al Rajhi Mena Dividend Growth Fund – launched in 2012 – allows investors to take advantage of sharia-compliant invest-ment opportunities available across the Mena equity markets while earning semi-annual cash dividends.

The firm also successfully offered two capital protected funds – products based on the arbun mechanism, a downpayment with revocation option akin to a call option in the western sense – that returned 11.5% for Al Rajhi GCC Shares Capital Protected Fund and 15.2% for Al Rajhi Local Shares Capital Protected Fund dur-ing the life of the product.

ARC has been at the forefront of developments in sharia-compliant real estate income funds. Its real estate funds team is a recognised standard setter in the industry, known for its high level of transparency and sector benchmark deals, according to the firm.

ARC’s real estate funds team has closed real estate transactions worth approximately SAR2bn ($530m) in the region. According to the latest Zawya rankings, Al Rajhi Capital also retained the status of top-ranked fund manager with most of the funds ranked within the top five results in several categories.

ASSET mANAGER – uAE

Union National BankConsistent approach works for union National Bank

Over the past 12 months, Union National Bank’s Al Samaha Islamic Fund has recorded growth of 47.26%. During that period the bank has established investment limits and guidelines to enhance its funds’ risk reward parameters, sought to increased returns through consistent filtering and screening for opportuni-ties and developed three new products for its ultra-high-net-worth clients – High Dividend Yield GCC portfolio, GCC Islamic Equity portfolio and Protective GCC Equity portfolio.

Features that distinguish Union National Bank from its com-petitors include its unique ownership structure – 50% owned by the Abu Dhabi Investment Council and 10% owned by the Invest-ment Corporation of Dubai – its presence in the Qatar Financial Centre and Kuwait, its representative office in China and fully-owned bank in Egypt, UNB-Egypt, and a team with 70 years collective experience in the investment field.

Union National Bank considers its service and investment process to represent the most consistent investment approach throughout the UAE.

The bank’s team have introduced several innovative investment concepts across the major two asset classes of fixed income and

equities over the past 12 months, including an MSCI portfolio to track the performance of stocks that would most probably be involved as constituents on the MSCI Emerging Markets index.

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| MIDDLE EAST AWARDS 2014

ASSET mANAGER – QATAR

TFI Asset ManagementThe First Investor has successfully grown its Aum and client portfolio

The total assets under management (AuM) of The First Investor Asset Management (TFI) has increased almost 145% year-on-year to reach nearly QAR500m ($137m). The firm believes it has the fastest growing AuM, both regionally and domestically. The discretionary portfolios that TFI has managed over the past 12 months have increased on average 60% year on year.

“We take great pride in our robust track record and in the fact that we believe we outperformed all our competitors over the past 12 months. Our outperformance has been the cornerstone of our very aggressive client acquisition over the past year,” says Patrick Rahal, asset management manager at TFI. “We strongly believe that by year end 2014, we will be able to double our current total AuM.”

The TFI GCC Equity Opportunities Fund has done very well, increasing AuM by around 40% year-on-year and surpassing QAR150m. The fund’s performance, in net asset value increased around 15% year-on-year. This, according to the firm, makes it the second largest sharia-compliant GCC equity fund in Qatar and one of the best performing funds of its kind in the Sharia compliant universe.

Its dedicated tier-1 investment team has an extremely low level of employee turnover over past five years. The two fund managers responsible for the opportunities fund have a combined 22 years

of experience in equity markets with tier-one financial institu-tions. The team is passionate about its research, over the past years, they have met with senior management from more than 200 listed companies in the GCC and the wider Mena region.

TFI has a committed stock picking philosophy, using funda-mental analysis as main it valuation tool. Its investment process is fundamentally driven with short-term speculative trading. The firm says it embraces technology, from real-time electronic trading and analysis to regular video conferencing with senior management of GCC-listed companies.

“TFI asset management has a flexible product development infrastructure. We offer one of the widest sharia-compliant liq-uid investment products offering – regional funds, discretionary portfolio management services and structured notes – knowing that equities as an underlying asset in a sharia-compliant capital protected structure are very scarce in the region,” says Rahal.

The firm has two new global equity funds in the pipeline, pend-ing regulatory approval. It says the new funds will broaden the overall fund offering currently available in Qatar and the region.

TFI says it adopts a persistent governance and feedback pro-cess, which it takes very seriously. Typically this includes external and internal assessments of success areas and areas for improve-ment. This keeps the firm on target with its transparency and reporting on true product costs and profitability. “This helps to continuously course-correct and accurately measure results and provide ethical services to our clients,” adds Rahal.

ASSET mANAGER – EGypT

CI Asset ManagementThe subsidiary of the Commercial International Bank of Egypt has performed strongly against its competitors this year

CI Asset Management outperformed the Egyptian Stock Exchange main stock index EGX 30, by 2.39% in the year begin-ning 2013 to April 2014. The firm ranked highly in assessments prepared weekly by the Egyptian Association for Investment Management to assess the performance of the investment funds in Egypt.

The firm has EGP8bn ($1.1bn) AuM across seven funds and discretionary portfolios, according to the firm. “This makes us one of the top asset managers in Egypt in terms of size, first in terms of product diversity and number one in terms of perfor-mance in both equity and fixed income for the year,” says Sameh Hassan Khalil.

It created and manages the first and only sharia-compliant money market fund in Egypt issued by a bank. CI Asset Manage-ment has also been mandated for the first money market funds issued by an insurance company, which are scheduled to launch shortly after this publication goes to press.

This year the firm bolstered its expertise in the equity and fixed income market in Egypt by hiring two asset managers, one for equity and one for money market and fixed income. Khalil says these strategic hires were key to the firm’s success.

CI Capital Holdings and its subsidiaries place great impor-tance on governance and coordination between practices to maximize the benefit of its shareholders and adhere to the highest standards of transparency through information disclosure and financial reporting, according to the firm.

The firm emphasises the importance of internal auditing, which ensures standards are kept to a standard that the man-agement are satisfied with. “The internal control reviews all CI Assets Management businesses and aspects of its activities, and ascertains the extent to which it follows and complies with legal, contractual and regulatory rules,” explains Khalil.

The firm is wholly owned by the largest private commercial bank in Egypt, The Commercial International Bank, which offers a full range of banking services to more than 590,000 clients through more than five thousand employees. In addition to tradi-tional products, the bank provides wealth management services and securitisation, direct investment and treasury.



ASSET mANAGER – BAhRAIN

Al Baraka Islamic BankTrade finance investment product milestone for Al Baraka

Al Baraka Banking Group is a Bahrain joint stock company licensed as an Islamic wholesale bank by the Central Bank of Bahrain, listed on the Bahrain Bourse and Nasdaq Dubai stock exchanges. It is a leading international Islamic banking group providing its services in countries with a total population of around 1 billion.

Ahmed Al Shaikh, head of investment banking at Al Baraka Islamic Bank says: “Our institution is at the forefront of financial service providers in the Islamic finance space. We are growing in presence, growing in the type and quality of services and its variety, across the board.”

Over the past year Al Baraka Islamic Bank’s key achievement was launching a unique structured finance product called Al Baraka Sukuk Al Wakala, which is a trade finance investment product. The sukuk are expected to have a 6% rate of return over an 18-month maturity period. The bank said it intends to invest the proceeds of the sukuk in wakala structures in a sharia-com-

pliant trade finance arrangements.Al Baraka says it has, over the years, established niches in key

markets that are uncorrelated to markets and therefore present it with a natural risk diversification. This is a phenomenon that few banks in the region possess, according to the bank.

The group has a wide geographical presence in the form of sub-sidiary banking units and representative offices in 15 countries, which in turn provide their services through approximately 500 branches. Al Baraka has a strong presence in Bahrain, Jordan, Tunisia, Sudan, Turkey, Egypt, Algeria, Pakistan, South Africa, Lebanon, Syria, Iraq and Saudi Arabia, including two repre-sentative offices in Indonesia and Libya. Al Baraka offers retail, corporate, treasury and investment banking services in accord-ance with sharia principles.

The bank differentiates itself on its global reach, quality of offering and the variety of financial services being offered. It says that its approach is to serve society and engage in business in a socially responsible manner that serves the needs of the com-munity at large, while at the same time adhering to sharia ethical principles.

ASSET mANAGER – LEBANON

Blominvest BankEuro-based fund launch stands out for Blominvest

Blominvest Bank recorded a year-on-year AuM increase of 15% to $621m in the first half of 2014. Notable events over the last 12 months include the launch of the Blom Money Market Fund in euros following the successes of the Lebanese pound and US dollar classes and the introduction of the Al Mazaya Saudi Arabia Fund, an open-ended investment fund that invests in securities selected from the S&P Saudi Arabia Domestic Shariah Index.

Since inception in 2008, just months before the global finan-cial crisis, Blominvest’s asset management division has been at the forefront of sustainable investment product development, which has been reflected in the growth of its AuM.

The driving force behind this build-up of funds has been the product development methodology of the asset management team, whose expertise in engineering financial products has hedged investors from the financial crisis as well as providing them with steady returns that have surpassed other investments in the same class, according to the firm.

The asset manager says that its team channels the creativity and devotion of its experienced professionals to develop in-house products that address relevant clients’ market concerns. It adds that Blominvest Bank is a pioneer in Lebanon for launching and managing funds with equity components.

The success of its existing funds, with over $150m in AuM, has shown the bank that there is an appetite for its brand of balanced investment, which in turn “boosts its resolve to innovate and per-

form”, according to a spokesman.In late 2008, Blominvest’s asset management department

became a pioneer in the Levant for launching two mixed asset class mutual funds holding equity components – the Blom Cedars Balanced Fund and Blom Petra Balanced Fund. These open-ended investment funds were designed to provide annualised returns higher than bank deposit rates at acceptable risk levels.

The guideline allocation of 75:25 debt:equity proved success-ful, especially in times of market turmoil. The asset management department introduced the discretionary portfolio management (DPM) service in the second quarter of this year and managed to cater to the needs of 12 similar funds.


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ASSET mANAGER – KuwAIT

MarkazApplying an intelligent approach to asset management in Kuwait

The Kuwait Financial Centre (Markaz) was established in 1974 and listed on the Kuwait Stock Exchange (KSE) in 1997. It had assets under management (AuM) of more than $3.8bn as of June 30 2014.

The firm offers a range of asset management services, includ-ing investment advisory, GCC & international investments and private equity investment. It introduced the first options trad-ing platform in the Middle East by issuing and selling derivative instruments on KSE listed stocks.

Markaz has consistently outperformed the relevant bench-marks on its equity funds and managed portfolios and earned a place among the top performing fund managers in Kuwait with its investment managers supported by a research team of experi-enced finance professionals, according to the firm.

Client investment solutions are underpinned by market due diligence and monitoring. Transparency is delivered through monthly reports and quarterly reviews and each dedicated port-folio advisor is trained to identify investment opportunities that adhere to three key elements – diversification, reliance on funda-mentals and anticipation of future trends.

Private equity services enable investors to enter venture capi-

tal and private equity funds at lower minimum investment rates. Markaz conducts thorough analysis and due diligence studies of all potential private equity investments and this has enabled it to generate returns in excess of those generated by the public mar-kets to compensate for the high level of risk associated with such long-term, illiquid investments. A US law firm conducts legal due diligence on all private equity investment structures.

Markaz aims to be thematic in selecting research ideas. Being a regionally focused company, its research is biased towards issues confronting the GCC and Mena region but the broader aim is to continuously benchmark the region with other devel-oped and emerging market peers in order to obtain the requisite positioning.

In 2010, subsidiary Marmore Mena Intelligence was established to provide asset management and investment banking-focused research on the Middle East and North Africa, supporting Markaz in providing investment ideas to clients but also delivering quantitative, unbiased research on the local and regional investment environment.

The research team utilises highly specialised databases, both outsourced and developed in-house, in order to support its pres-entations and analysis with relevant statistical data. The team also employs advanced quantitative finance techniques to the extent they can be successfully adapted to the region.



ASSET mANAGER – OmAN

Bank Muscat Asset ManagementThe Bank muscat subsidiary puts its success down to a strong teamwork ethos

During the last 12 months Bank Muscat Asset Management has won business amounting to assets under management (AuM) of $1.6bn from both institutional and retail clients. The firm has also had one of the top performing GCC equity funds in the region in the past year, according to the bank, with its Oryx fund, which returned 47.9% relative to a benchmark return of 23%. The Mus-cat Fund, which focuses on the Oman market, also returned a strong 13.8% relative to a benchmark return of 10.6%.

A spokesman for the bank says: “This strong performance is not only the fund managers’ achievement, but an achievement of the overall team. The culture we have at Bank Muscat of keeping a small team together for a long period of time is very important to our success. The team has a strong buy-sell discipline and empha-sis on risk-adjusted returns.”

The firm describes itself as “the market leader” in equity invest-ments either through funds or discretionary portfolios. It has experience in managing equity, fixed income and, more recently,

property. Offering both active and passive solutions, the firm says it places great importance on keeping dialogues open with clients to understand their needs.

Having liaised with clients over the past year, the team realised there was an appetite for it to offer a property portfolio. As a result they launched the Bank Muscat GCC Property Income Fund in June 2014. The fund invests in income yielding properties that aims to generate a stable annual yield of between 7% and 8%. The fund completed its first transaction by acquiring Movenpick Hotel Jumeirah Beach, a five-star hotel located in Dubai’s Jumei-rah Beach Residence.

One of the major innovations for the firm in the last year was the implementation of the Charles River Investment Management platform, a software package that improves Bank Muscat’s capa-bilities in portfolio construction, risk controls and attribution.

The firm is a subsidiary of Bank Muscat, the largest bank in Oman, with offices in all GCC markets. It puts its success down to its teamwork in company evaluation and selection, strong relationships with intermediaries and a strong research-driven investment approach that combines fundamentals with broader factors including market dynamics, news and peer group analysis.

ASSET mANAGER – jORdAN

AB Invest Asset ManagementAB Invest’s Arab Bank mena Fund has had another successful year

AB Invest’s Arab Bank Mena Fund is one of the oldest funds in the region with a track record longer than eight years and has consist-ently outperformed regional benchmarks, on both an absolute and risk-adjusted bases. This outperformance was maintained in 2013 to 2014.

Despite a relatively lower exposure to the market, the Arab Bank Mena Fund returned 12% in the year to June and 19% in the past 12 months. The IIAB Islamic Mena Fund has also returned decent returns, 8.36% year-to-date and 10% in the past 12 months. These solid performances came on the back of rela-tively low volatility through the year.

AB Invest’s investment philosophy is focused around man-aging the downside risks during an investment cycle. It views investing as a process of forecasting and managing volatility and risk and aims to maintain the consistency of returns on a risk-adjusted basis for the long term, according to the firm.

Omar Al Wir, CEO of AB Invest, says: “AB Invest Asset Man-agement distinguishes itself not only by supporting and investing in a highly qualified team of professionals, but also by adopting and applying the highest code of ethics and standards of practice as a source of distinctive and sustainable competitive advantage.

“In this respect, the highest levels of transparency, disclosure,

integrity and prudence are applied in the day-to-day operations, as well as when communicating with clients.”

The firm says its core values are “integrity, prudence and ethical practice”, which “will remain the main ingredient to its competi-tive edge and will sustain its industry position in Jordan and beyond”.

Al Wir adds: “Our operational approach emerges from our ability to blend our regional understanding, our global reach, our technology, our continuing education and learning shar-ing culture, and our risk management awareness into a capacity to deliver need satisfying investment solutions in all market conditions.”

AB Invest is the largest private asset manager in Jordan in terms of third party assets under management, according to the firm. In addition to offering discretionary portfolio management investment solutions, Asset Management has launched a series of Mena-focused funds, both conventional and shariah-compliant. These funds invest across all available asset classes and are domi-ciled in the Mena region as well as Guernsey.

Over the next year AB Invest Asset Management is exploring and testing many investment solutions. AB Invest is consider-ing launching various structured products that have been built wholly in-house, as opposed to branded white-labelled structures built elsewhere and marketed through a local promoter. This would be a first in Jordan and could change the landscape of the Jordanian capital markets.


| QAtAr

Index provider MSCI’s landmark inclusion of Qatar in its Emerg-ing Markets (EM) Index in July has, with one fell swoop, rendered the gas-rich Gulf state the biggest

Middle East market in the EM basket, her-alding a potentially seismic expansion in its investor base.

Unlike Dubai, which as part of the United Arab Emirates (UAE) was the other Gulf market upgraded by MSCI in early June, the Qatar Exchange has not experienced a sharp correction and the market by mid-September was up 36% year-to-date.

The MSCI’s upgrading of Qatar – potentially opening up the market to substantially higher volumes of pas-sive money, as it is tracked by investors managing some $9trn – is viewed as a game-changer in its capital Doha. Yet

investors are keenly aware that markets tend to perform better in the phase that follows the announcement of a future inclusion on the MSCI EM index, rather than once the upgrade is takes effect.

Dubai’s performance since the UAE was included has not been as smooth. The late June correction in the Dubai market, when the market shed 20% in the space of

a couple of days, had nothing to do with the economy’s inclusion in the MSCI index. It instead reflected investor jitters relating to management changes at the leadership of a major local corporate, real estate devel-oper Arabtec (see bit.ly/1yg39PG ).

“Qatar and the UAE are close in terms of the degree of corporate governance in each market,” says Gıyas Gökkent, senior

James Gavin considers the prospects of the Qatari markets now that it has passed several major milestones on the road to becoming a fully-fledged financial market

The future is now


QAtAr |

economist at the Institute of International Finance in Washington. “The UAE may be slightly more open, but they move in line. And if they didn’t have similar character-istics to other emerging markets, neither would have been included in the MSCI EM index anyway.”

Not that it has been plain sailing for the Qatar Exchange in the past few months. The MSCI reversed a decision to add local petrochemical company Mesaieed to its EM index on August 13, having only included it the day before, citing issues with the firm’s equity ownership limits which set a maximum ceiling of one mil-lion shares per individual shareholder.

Liquidity boostSuch blips aside, the Qatar market is anticipating sizeable increases in liquid-ity from the upgrade and its subsequent exposure to a far wider investor base. With authorities in Doha raising the lim-its on foreign ownership in Qatari stocks to 49% in August, from a previous cap of 25%, the authorities appear serious, on a general level, about opening up to foreign investors. It would certainly be welcome – inward foreign portfolio investment was low at just 1% of GDP in 2013.

Gökkent says: “The Qatar stock mar-ket has already changed to some degree. There has been greater opening up, with the decree to increase the limit on foreign ownership in companies to 49%, which was part and parcel of the commitment made to become part of MSCI’s EM index.”

The impacts are likely to be both short term and long term, with the biggest short-term effect being the jump in daily liquidity. “Average daily volumes have doubled versus one year ago,” says Akber Khan, director of asset management at Al Rayan Investment in Doha.

Increased trade volumes help reduce the bid-offer spreads, which attracts greater liquidity. “One of the impacts of extra liquidity has been to tighten bid-offer spreads, which in turn drives more liquidity and creates a virtuous cycle,” says Khan.

The inclusion of Qatar into EM has some negatives too. Khan says the propor-tion of daily volumes from retail investors will reduce as foreign institutional inves-tors increase involvement. “An implication of this is an increase in correlation of the Qatar market to swings in global investor sentiment, resulting in greater volatil-ity for reasons unrelated to the domestic market.”

Events in New York or Singapore will henceforth have a much greater impact on the Qatar market. Investment managers may decide to allocate 3% cash across all

EM portfolios, based on an instant deci-sion that has no real domestic driver.

More profound change is coming in the wake of MSCI inclusion by altering the broader narrative around Qatar’s market over the medium term, which will open it up to new sources of funding for govern-ment projects and related private sector expansions. Gökkent says: “Already, pas-sive funds have dedicated a portion of their portfolios to Qatar because of its inclusion in EM index. Active funds were always interested in Qatar, but more so now as they are part of the EM index rather than the frontier market index.”

Deutsche Bank estimates there is around $257bn of passive money invested in EMs, of which about $60bn follows the MSCI classification. According to the bank’s calculations, assuming that most of the Mena money is already invested in

Qatar, there would a theoretical potential inflow towards Qatar of up to $2.5bn.

Inclusion will register other changes in Qatar’s market. There will be more focus on domestic spending plans because these will now have implications about which stocks investors want to buy into.

Corporate governanceWith the change in the investor base and the advent of more players with long-term horizons, the Qataris will face greater demand from shareholders for better communications, more transparency and generally stronger corporate governance standards.

These soft issues are important to to the large global investors, and the pressure for change is likely to build gradually. Khan says: “A few companies already tick all the boxes but most do not and we will see over the next two to three years how far they have come in making the necessary changes.”

The encroachment of large, long-term investors means the pace could also change, with more due diligence in the market before getting in. “It is like an oil tanker – it takes a longer time to move but when it does it leaves a huge wake,” says Khan.

“If I manage a $250bn EM fund and decide to allocate 1% to Qatar, that is $2.5bn. It may take some time to achieve but when I do and become a significant shareholder in a number of companies, I may start to have some interesting con-versations with management teams down the line.”

Of course, the reason why investors should have Qatar on their radars is not purely down to the index reclassification.

“One of the impacts of extra liquidity has been to tighten bid/offer spreads, which in

turn drives more liquidity and creates a virtuous cycle”

AKBER KhAN, AL RAyAN INVESTmENT


It is also a strong preforming market. Investors may have chosen to ignore markets such as Qatar in the past due its relatively small size – though still the second-largest in Mena in market capi-talisation terms – but the returns are now hard to ignore.

Qatar could also benefit from t h e c h a n g e s underway in neigh-bouring Saudi Arabia, where the stock market is set to open up local stocks to non-Saudi investors. The largest stock in Saudi is Saudi Basic Industries, which has a market cap of $110bn – Sabic alone trades more value

than the entire Qatari stock market. “With the Saudis coming to the party it

will be too big to ignore because the region may account for 4% to 5% of the MSCI EM basket,” says Khan.

Investors may decide to allocate more resources to the region as a whole, including Qatar and the UAE, as there is now suffi-cient liquidity and market capitalisa-tion to justify such a shift.

Qatar still has much to do to con-

vince investors that it is a serious EM player. Despite the raising of the foreign investment ceiling to 49% in August, for-

eigners are still not allowed to participate in Qatari initial public offerings (IPOs). The IPO market is reserved for locals, who are encouraged to buy offerings and then are free to sell to foreigners – enabling Qatari investors to crystallise their profits.

Gökkent says: “Qatar is lagging in terms of becoming a regional financial centre. It may have to move into more niche areas, more asset management-type activities. To create a financial centre, you need the connectivity, the hard and soft infrastruc-ture, along with the lifestyle, the taxation regime, the skills and talent pool. All these things have to come together and it can take a while.”

Development of the country’s financial services sector is one of the pillars of Qatar’s strategic blueprint, the Qatar National Vision 2030, which aims to broaden and deepen the country’s economic base and diversify its revenue streams.

Omar al-Nakib, an economist at National Bank of Kuwait, says: “The recent inclusion of the Qatar bourse in the MSCI EM represents a significant step in the ultimate development and liberali-sation of the country’s stock market and financial services sector. The authorities’ hope is that Qatar will be able to become a world-class financial services hub for the region, attracting investment, capital and leading businesses to the country.”

Valuations have crept up in the few months since Qatar entered the MSCI EM index, providing confidence to policymak-ers that their grand designs will eventually be realised.

And MSCI is not the only index pro-vider to upgrade the two Gulf states, with S&P Dow Jones announcing that it would reclassify both Qatar and UAE as emerg-ing markets as of September 22.

The prospect of dual listings, listings of other GCC IPOs and the introduction of reforms such as delivery-versus-pay-ment will bolster confidence in Qatar’s prospects.

So long as long-term investors’ priori-ties of better transparency and governance standards are met, the Gulf ’s small but powerful hydrocarbons producer should register more prominently on global investor radar screens in future. g

market view Afa Boran, lead manager and head of asset management at Amwal, discusses the prospects of the Qatari market

How is the Qatar market faring since the upgrade?The Qatari market prior to the upgrade was valued at a discount to most other markets. With the upgrade announcement, that gap closed. The question now is if the market is currently trading at a premium. In our analysis, we find a handful of stocks that are significantly overvalued and out of synch with fundamentals. If you exclude them, the rest of the market is not as expensive.

Which are these overvalued stocks?Masraf Al Rayan’s market cap at one point recently exceeded its total loan book. Currently its price to earnings (PE) ratio is 24-times – double that of the average of QNB, Doha Bank and CBQ, whereas its recent loan growth has been lower.

Vodafone Qatar’s PE valuation calculated on earnings before amortization is 63-times while the average telecom PE in the GCC region is around 11.5-times. To further illustrate, Vodafone Qatar’s market cap per subscriber is $3,700, while the regional average is around $500.

Lastly, Qatar Insurance’s PE, excluding one-off gains is around 43-times while the GCC average for the insurance sector is 16x. Its PE is around 3.0-times versus the GCC insurance sector average of around 1.7-times.

How does Amwal view the Qatar market’s prospects, as opposed to other Gulf markets?Qatar along with Saudi and UAE is one of our favoured markets but stock picking is key. Saudi Arabia and the UAE also have several significantly overvalued stocks, but there are many we still like. As an off-consensus view, we also like Oman, although it is a smaller market.

Will the raising of the foreign investment ceiling to 49% have a decisive impact? Definitely. Qatar’s upgrade was also coupled with increasing foreign ownership lim-its to around 25% on average and that triggered more buying – both by locals and foreign investors. We suspect, though, a lot of the foreign inflow was passive money, and hence not a good indication of the relative attractiveness of the market from a valuation perspective.

Sell-side brokers estimate current foreign investment in Saudi at around $4bn, and they expect this number to increase to around $40bn post-MSCI upgrade. When upgraded, Saudi will be highly visible as a top 10 global emerging market alongside markets such as Brazil, India, Mexico and Russia.

“The authorities’ hope is that Qatar will be able to become a world-class financial services

hub for the region” OmAR AL-NAKIB,

NATIONAL BANK OF KuwAIT

“Active funds were always interested in Qatar, but more so now as they are part of the Em index rather than the frontier

market index” GIyAS GöKKENT, INSTITuTE OF

INTERNATIONAL FINANCE



BROKER – SAudI ARABIA

EFG HermesBroker positioned to capitalise on Saudi market liberalisation

EFG-Hermes KSA acquired its brokerage licence in 2006 and is recognised as one of the first foreign brokerage firms to execute and facilitate equity transactions on the Saudi Stock Exchange (Tadawul).

It has been able to capitalise on its long-term presence in the market and continue to compete with the top two foreign broker-age firms for a leading market position. It was ranked first among foreign brokers in April, September, October and December 2013 and ranked second in March, June, July and August 2013. Overall during the financial year 2013, the firm stood in second place among competing foreign brokers. The firm is now ranked first amongst the foreign brokerage firms during the first half 2014.

EFG-Hermes KSA launched its first derivative trading instru-ment, also known as a swap agreement, in 2008 to facilitate the trading of Saudi Arabian equities to foreign institutional inves-tors. This was a move that promoted Saudi Arabian equities to global emerging market (GEM) funds, and Mena-dedicated funds and at the same time served to increase Tadawul’s depth in terms of both investor type and liquidity.

The firm has more than 650 clients, of which 200 are institu-tional clients. It caters to a wide array of investors from retail, VIP and high-net-worth clients to local, regional and foreign institu-tional investors.

EFG-Hermes KSA offers various niche services to its client base, including a recently acquired margin trading license, which is part of the firm’s aggressive retail client acquisition programme initiated at the beginning of 2012. Furthermore, in order to cater for an expanding client base, the firm has launched a new and more sophisticated version of its online trading platform to meet demand for higher standards of professionalism and efficiency.

Other vital services include executing conditional client trans-actions to meet high-net-worth and institutional investors’ needs. EFG-Hermes KSA also provides corporate access to senior and executive management teams of publicly-listed companies on Tadawul. Part of the process of reaching out towards facilitat-ing investor familiarity with corporate Saudi Arabia is arranging investor mission trips to the country, thus promoting a business-friendly climate in the country.

BROKER – uAE

ADS SecuritiesOrganic growth key to AdS Securities development

ADS Securities has become the largest forex brokerage in the Middle East by volume. The company is headquartered in Abu Dhabi with all services – front, middle and back office – being based in the United Arab Emirates. It is almost unique in the region in that it is not an offshoot of a large European or North American operation but rather has grown organically from within the Gulf Cooperation Council region.

ADS Securities offers both institutional and retail trading and is regulated by the Central Bank of the UAE. The firm was founded on a number of important considerations. The first was that , as there were no major brokers situated in the GMT+4 time zone, it could bridge the flows from the closing of markets in Asia through to the opening of trading in Europe. ADS Securities’ first ambition was to fill this gap and close down the fall-off in liquid-ity that exists when trading is softening at the end of the day in Singapore.

The second consideration was to come to the market with a very well-capitalised company that could access high levels of capital – and importantly to translate this into the ability to offer

deep liquidity and therefore market-leading pricing. The Middle East is one of the few markets in the world that can achieve the creation of such an enterprise, according to the firm.


BROKER – QATAR

QNB Financial ServicesQNBFS proactive in supporting local market

QNB Financial Services (QNBFS) is among the leading two bro-kers on the Qatar Exchange with a market share of 16.77% for the last 12 months and continues to be favoured by foreign institu-tional investors. QNBFS has been recognised as Qatari Broker of the Year by Global Investor/ISF for both 2012 and 2013.

Over the last 12 months the firm has successfully partnered the Qatar Exchange to co-host road shows in New York and London for 13 Qatari companies, conducting more than 300 investment meetings, and in Qatar it hosted more than 30 local and global investment managers.

It has also conducted more than 125 meetings with listed com-panies and unlisted economically important institutions and hosted quarterly earnings calls for four major listed Qatari com-panies. The research team provides coverage on more than 15 companies listed on the Qatar exchange in addition to periodic reports on small-cap, undiscovered names.

A spokesman for QNBFS says the brokerage has considerable trading and execution capabilities, which include dedicated sup-port, agency-only brokerage, block trading and trading execution.

He adds there is dedicated support in the form of institutional equity sales and execution traders that have many years of indus-try experience in local, regional and global markets.

QNBFS is an agency-only broker and only trades on behalf of its clients so there are is no potential for conflicts of interest. It has broad relationships so the firm can provide efficient execution for large blocks of stock or thinly-traded securities. Its trading execution is modelled on volume-based and price-based trading strategies.

Independent research is at the core of QNBFS’s offering. It is in close proximity to the companies it covers and has long estab-lished, quality institutional relationships. QNBFS is the only broker that covers Qatari equities from Qatar and its products include company research, Qatar Exchange fact books, initiation reports, earnings updates – dailies, weeklies and monthlies – as well as market and sector reports.

The firm also provides short-term tactical ideas for traders and its research plan includes expansion into regional equities. QNBFS also has strong connections with Qatari companies and provides institutional investors with deep access to company managements.

BROKER – EGypT

EFG HermesNew trading application improved client access to markets

EFG Hermes Egypt is the headquarters of a multifaceted regional brokerage that facilitates transactions and provides trading exe-cution on the Egyptian Stock Exchange (EGX).

The firm has maintained a market share and ranking that reflects its strong position in terms of market and client acces-sibility. Despite turbulent country and market conditions, EFG Hermes Egypt ranked first with a market share of 29.1% as at the end of 2013 and also achieved a first ranking with a 28.02% market share during the first half of this year.

With a client base in excess of 49,000 and over 3,000 new additions during 2014, the firm caters for a wide array of clients ranging from retail, VIP and high-net-worth clients to local and regional institutions as well as foreign institutional investors. The firm executed about 28% of western institutions’ total brokerage transactions on the EGX in the first half of 2014.

In terms of product development, the firm has successfully launched a state of the art multi-platform trading application. Through this application, clients can track and trade multiple markets in real time anywhere, anytime.

EFG Hermes also provides multi-faceted trading platforms for its client base that include online trading and call centre ser-vices. Complementing such a wide platform are flexible client support measures through compliance, technology and risk con-

trol systems that allow the firm to adhere to global best practices in corporate governance and transparency, with standards that exceed the requirements of the vast majority of the markets in which it operates, according to the firm.

A significant part of EFG Hermes Egypt’s services to its cli-ent base is corporate access to senior and executive management teams of publicly listed equities on the EGX and it also facilities arranging investor trips to the country, thus promoting a busi-ness-friendly climate in Egypt. Moreover, it has the support of a large and dedicated research division that provides thorough fundamental analysis and includes equity coverage of 25 listed companies on the EGX, in addition to sector analysis, economics reports and strategy reports.



BROKER – BAhRAIN

Mubasher Financial ServicesBahrain broker opens up global markets

Mubasher Financial Services (MFS) is one of the leading pro-viders of regional brokerage in the Middle East for institutional investors, combining financial market expertise with innovative products and services. MFS is regulated by the Central Bank of Bahrain as a Category 1 investment business firm. The head office of MFS is located in Bahrain and the firm has branches in Dubai, Jordan and Riyadh.

Mubasher was established in 2000, initially in Saudi Arabia, to provide online trading solutions. Subsequently it expanded across the GCC and in 2005, opened Mubasher Direct Brokers Financial Services (Mubasher DBFS), a regulated local broker in Dubai which went on to achieve number one status on the Dubai Financial Market. In 2006, MFS was created in Bahrain to pro-vide institutions access to all GCC markets and more recently to global markets.

Services include omnibus capability for dealing across the region and direct market access. The firm’s worked order capa-bility means MFS dealers target common benchmarks such as volume-weighted average price or VWAP (the ratio of the value traded to total volume traded over a particular time horizon), percentage volume and arrival price. Back office services include

clearing, FX and corporate actions. Other services offered include delivery versus payment (DVP) trading limits and fix order rout-ing from all major networks including Reuters, Bloomberg and Fidessa.

MFS offers professional dealing and order management screens to trade on behalf of multiple customer accounts, cover-ing position keeping, real time and historical data, charting and technical analysis. Market information is drawn from sales trad-ers as well as third party broker research.

The Mubasher FS fund platform offers individual investors convenient and seamless access to multiple regional and inter-national markets with a range of investment products offered by experienced investment houses, as well as access to research, news and market information needed to make informed invest-ment decisions.

Owned by MFS, DuTrade provides 24/7 online trading in a real time multi-exchange format with a wide variety of options that include equities and funds, supported by powerful trading tools and analysis.

DuTrade enables round the clock, simultaneous multi-exchange access and international trading, allowing individual clients to trade online at their own place, using the platform that best suits them. For example, clients can trade in the Saudi mar-ket in the morning and the US at night.

BROKER – LEBANON

MedSecurities Investmentpersonalised approach is integral to medSecurities’ development

MedSecurities offers brokerage services covering international, regional, and local markets. It provides access to a wide range of financial instruments including equities, fixed income, funds and derivatives, in addition to over-the-counter securities.

Against the backdrop of a fast changing global economic and financial environment, MedSecurities says it has evolved its business operation so that it remains able to provide customers with suitable investment solutions. This has been achieved by re-examining its existing product lines and by upgrading them to meet new demand. The firm was further strengthened by the recruitment of new talent into the brokerage team.

The firm says its team believes in a personalised approach to business relations and attempts to build long-term relationships with their clients. It adds that it strives to address our clients’ spe-cific needs while maintaining highly-competitive brokerage fees.

The services that MedSecurities deliver through its various units aim to be driven towards performance as well as preserva-

tion of the wealth of its customers. It says it “sees opportunities where others see challenges”, and will always aim to be a leading provider of investment solutions in Lebanon and in the region. According to the firm, the pillars of MedSecurities’ culture are listening to and catering for the needs of its customers, which it says is its most valuable asset.

MedSecurities operates under Lebanese law and acts as the investment arm of BankMed covering local, regional and interna-tional markets. It executes the strategy of BankMed in the areas of brokerage, investment product development and lending against marketable securities. MedSecurities also offers services for structured notes on equities, futures and investment funds, in addition to equity and debt placements.

Over the past years, MedSecurities have brought in a range of new measures, including institutional fixed-income arbitrage and focused private placement positioning. It also introduces a series of structured products. An example of innovation is the launch of its Solidere Capital Guaranteed Certificate, which offered a select group of customers the opportunity to seek returns on share prices whilst limiting their risk.


BROKER – jORdAN

AB InvestThe brokerage achieves the highest turnover on the Amman Stock Exchange due to a low fee structure

There are several factors that distinguish AB Invest from its competitors. The firm offers a full global trading platform cov-ering local, regional and international markets and transparent execution with competitive fee structures from its dedicated institutional brokerage desk, according to the firm. It charges the minimum commission allowed by the regulator on the Amman Stock Exchange and confirms executions through a variety of media including phone, email and SMS.

In 2013, AB Invest had the highest turnover on the Amman Stock Exchange with a market share of over 19% and it remains one of the leading brokerage franchises in Jordan.

Regular market intelligence is a key competitive advantage for AB Invest, which is fully owned by Jordan’s largest bank, Arab Bank. The firm states that research is its backbone – its research department provides our clients with weekly market briefs for both the Amman Stock Exchange and the Palestine Securities Exchange. It also provides its clients receive economic reports, sector reports and equity research reports that are all based on in-depth research.

AB Invest was launched in December 2000 and operates a flow-only business and observes strict ethical standards across its

client base and network of more than 15,000 clients. Substantial investment in IT and operations infrastructure provides clients with a high level of service.

Its brokerage services are available to emerging market fund managers that want to invest in the Middle East and North Africa region, institutional investors that want to allocate part of their funds to the region and high-net-worth individuals.

AB Invest has strong ties with major international brokerage houses and agents to meet its clients’ needs on the local markets as well as the regional and international markets, according to the firm.

BROKER – pALESTINE

Al-Wasata SecuritiesAl-wasata Securities benefits from market education efforts

The total value of traded shares through Al-Wasata Securities during 2013 was approximately $288m across the Palestine exchange and regional markets, putting it in the leading ranks of brokerage companies among the eight brokerage firms in Palestine.

For the eighth year in a row Al-Wasata was ranked number one in terms of new investor acquisition, with a share of 20% of total investors in the market.

Al-Wasata was established in Palestine in December 2006 as a subsidiary of Bank of Palestine. Its paid-up capital is $3.56m – of which 87% is owned by Bank of Palestine – and its team offers professional investment services to both Palestinian and foreign investors.

Al-Wasata is a member of the Palestine Stock Exchange and holds licences from the Palestine Capital Market Authority for brokerage and issuance trusteeship. In addition to providing bro-kerage services in the Palestine Stock Exchange, it also provides brokerage services in different regional exchanges, including the Amman Stock Exchange, the Egyptian Exchange, the Dubai

Financial Market and the Abu Dhabi Securities Market.Al-Wasata uses the latest technology to help clients secure their

deals as quickly and securely as possible, according to the firm, and is one of the few Palestinian brokerage companies to provide investors with electronic trading services.

As a subsidiary of Bank of Palestine, Al-Wasata has more than half a century of experience in finance, investment and banking at its disposal. Operating from offices in Ramallah, Gaza and Khan Younis, the firm has plans to open brokerage windows through Bank of Palestine’s geographical network, which will give it access to most of Palestine’s urban and rural areas. So far brokerage win-dows have been opened in three of the bank’s branches.

Al Wasata has devoted considerable time and resources to educating the public regarding investing in Palestine. Since its foundation, the firm has been organising awareness workshops all over the region and several such workshops and presentations were conducted during 2013 with a view to informing existing and potential clients on trading in Palestine and the wider region.

Al-Wasata’s awareness programme is particularly focused on women and young people. In order to take advantage of high technology and social media penetration in Palestine to target the youth audience, Al-Wasata has conducted several awareness workshops on Facebook.



BROKER – KuwAIT

NBK CapitalThe subsidiary of NBK has overhauled its trading system and further enhanced its online presence

This year all three brokerage platforms under the Watani sub-brand maintained their market leading position in a challenging market environment. As well as successfully navigating the market’s transition to the new trading system Nasdaq OMX by upgrading and unifying systems, the firm has enhanced its online presence by adding online trading in Egypt to the six GCC mar-kets. NBK Capital Securities Egypt, the first brokerage license outside Kuwait, contributed actively to NBK Capital’s regional brokerage positioning.

The new upgrade provides investors with advanced charting and portfolio analysis tools live and with real time prices in six GCC markets. The online brokerage services allow clients to trade and transfer funds easily and reliably. The firm has also set up a call centre specifically catered to provide clients with access to information and answer their inquiries at any time.

NBK Capital, part of the National Bank of Kuwait, provides a wide range of brokerage services with access to the capital mar-kets of Kuwait and Mena as well as access to major international

markets. NBK Capital’s Brokerage services are housed under the umbrella of sub-brand Watani Brokerage, and provide clients with the full spectrum of brokerage services ranging from tra-ditional brokerage dealing in the KSE to online services for the KSE, GCC and the wider Mena markets.

This offering is complimented by access to the US markets through Watani Brokerage’s US online platform. NBK customers benefit from the synergy of having their bank account and broker-age account under the same umbrella of services, which allows for instant cash transfers between the two accounts. Watani Bro-kerage customers also benefit from in-depth research coverage including all sectors across the Mena markets

Key features of their NBK Capital’s services include:• Live, streaming quotes and comprehensive trade and portfolio

tracking, all from a single screen.• Easy integration between brokerage and personal accounts,

with the ability to transfer funds through debit cards – using the K-Net online banking network – and Watani Online.

• Collection of dividends and bonus shares and depositing them into customer brokerage accounts.

• Subscription to capital increases.

BROKER – OmAN

Bank MuscatThe bank’s brokerage division continues to provide market-leading service

Bank Muscat Brokerage, a division of Oman’s largest bank Bank Muscat, has played a key role in the development of brokerage services in Oman. The brokerage division has consistently won accolades from the exchange, Muscat Securities Market, over the years for its efforts promoting stock exchange trading.

Bank Muscat’s motto “Insight, innovate and implement” is reflected in an able team, innovative products and a track record of excellence, according to the firm. Bank Muscat’s brokerage says its core strengths are in the expertise of its equity research and its wide network of investors and it is the broker of first choice for foreign institutions investing in Oman.

The brokerage services a very geographically diverse base of emerging market institutional investors. Under a license issued by the Muscat Securities Market, Bank Muscat provides value-added stock brokering services to foreign and domestic clients. As well as servicing clients within Oman, the bank, through its network of partners, also provides brokerage services on select regional bourses.

The investment banking division, which includes the broker-age, is committed to offering a one-stop-shop financial services package. The division enjoys an unparalleled reach to investors within Oman. The bank’s geographically spread out branches offer contact points with investors throughout the length and

breadth of the Sultanate. In addition to the retail and institu-tional brokerage services, the division also offers clients the facility to set up a non-funded Trust Accounts that helps clients trade with anonymity while keeping their assets safe under Bank Muscat’s custody.

Strict compliance procedures ensure integrity of trades and protect the client’s confidentiality and interests. The settlement department works in a fully computerised environment and its communication systems ensure that brokers can always be reached, it says.


dUBAi |

Dubai is no stranger to vola-tility. The buffeting its reputation took after the government-owned invest-ment vehicle Dubai World

revealed in November 2009 that it could not repay its debts plunged the emirate into an economic tailspin, but it experi-enced a strong rebound in the following years and markets were at or near histori-cal highs by mid-2014.

So the sharp market correction that hit the emirate in June comes as something of a surprise. The Dubai Financial Market (DFM) has been booming, the index rising nearly 50% year-to-date. Since June this year, the United Arab Emirates (UAE) has been reclassified as part of index provider MSCI’s emerging market (EM) group of indices, putting it in line for significant inflows of institutional investment money.

Nonetheless, within weeks of the UAE’s inclusion on the MSCI EM index, Dubai’s market took a major hit, primarily related to the fallout from problems afflicting the UAE’s major construction company, Arabtec. This company was responsible for some landmark real estate mega-pro-jects such as the world’s tallest skyscraper, the Burj Khalifa. It also had one of Abu Dhabi’s main investment vehicles as one of its core shareholders, in the form of state-owned fund International Petro-leum Investment Company (IPIC) and its investment unit Aabar.

The Arabtec affairAfter reaching an all-time high of AED7.74 ($2.11) on May 14 2014, Arabtec’s stock price plunged 61% in June. The slide

followed increasing concerns after the resignation of chief executive and manag-ing director Hasan Ismaik. He announced plans to sell his stake in the company amid widespread speculation that he had fallen out with the firm’s Abu Dhabi back-ers, triggering his resignation. Investors feared the company was at risk of losing Abu Dhabi’s support, raising a question mark over the future viability of a series of large projects on its books.

Jordan-born Ismaik took office only in 2013, after Aabar had built a 20% stake in Arabtec. Ismaik’s own stake report-edly rose to almost 29% by June this year. However, the uncertainty over the cir-cumstances surrounding his departure sparked a sale among investors, who were already spooked by concerns that Dubai market valuations had become increas-

ingly disconnected from fundamentals as a result of the continuing rally.

Arabtec’s problems had the effect of dragging down the wider market. By June 24, Dubai’s stock market recorded its big-gest monthly fall in six years, at 7%, and by the end of June the benchmark DFM general index was showing losses above 20% for the month.

Once again, Dubai’s reputation had taken a mighty battering. The Arabtec affair shone an unflattering light on per-ceived structural flaws in the emirate’s business environment, with opaque busi-ness practices among senior business figures. Weaknesses in the capital market’s operations have also come to light. The UAE regulator faced stinging criticism for failing to ensure proper information disclosure at Arabtec, in light of the specu-

After the affairThe Arabtec episode reminded investors that Dubai remains a volatile market but also demonstrated it is far more resilient to shocks than in 2009, finds James Gavin


lation about its relations with Aabar.The Arabtec affair raises two separate

issues about the Dubai market. Loic Peli-chet, an analyst at NBK Capital in Dubai, says: “There was an issue of corporate governance in the way that they handled the corporate communications, in the way they handled the CEO buying a very large stake in the company. The other is the margin lending and the bubble that built up on the way up and on the way down.”

Many Arabtec investors were lever-aged and exercised margin calls when the stock started to fall, which then extended to other stocks in the market. Brokerage houses were accused of fostering a culture of margin trading, which permits broker-age companies to fund a percentage of the market value of securities traded, and secure as collateral for the same securities or any other collateral as required by its licence.

“Both issues [corporate governance concerns and margin trading] had an impact on the Dubai market and, certainly internationally, a lot of people were put off. Arabtec used to be a name that most finan-cial institutions would want to talk about,” says Pelichet.

Regulatory responseThe regulator, the Securities & Com-modities Authority (SCA), attempted to draw a line under the issue, responding to criticism that it had not enforced exist-ing regulations on margin trading. In July it announced changes to regulations on margin trading by eliminating ambigui-ties in the operation of margin accounts.

The SCA said appropriate actions were being taken against any brokerage com-pany exceeding its approved lending limit in margin trading. In a statement issued in early July, the SCA pointed out that it was scrutinising local public joint stock companies listed on the UAE markets for adherence to the Commercial Companies Law, the regulations and requirements of disclosure and corporate governance according to the best international prac-tices accredited by the International Organisation of Securities Commissions (Iosco), the International Monetary Fund (IMF) and the World Bank.

Foreign investors predictably took a dim view of events in Dubai. Fund man-agers plan to reduce their exposure to UAE markets, according to a Reuters survey of 15 leading investment manag-ers conducted in July. Only 7% intended to increase equity allocations there and 47% planned to decrease them, compared with ratios of 27% and 33% the previous month. The number of managers feeling bullish towards the UAE was the lowest

since the survey was launched in Septem-ber last year.

Market observers warn against draw-ing too many conclusions from the Arabtec saga, for all the blemishes it may have revealed about the Dubai market just weeks after it was accepted into the hallowed halls of the MSCI EM index. Nishit Lakhotia, head of research at Bah-rain-based investment bank Sico, says: “Arabtec was a rather exceptional case in terms of what happened in a period of just one or two months, with the volatility it led to both on the upside and downside. We have not seen any cases of that magnitude in the last five years.”

The problem is that the Arabtec affair happened at the same time that the UAE’s MSCI entry, which again inflated the market. Pelichet says: “We saw some out-flows of foreign money after the entry into MSCI but that was arguably due to the overvaluation and the exaggerated expec-tations that entry had created. Dubai is an emerging market, and with any emerging market there will always be some issues.”

At the moment, the situation appears to have stabilised. Despite the market cor-rection in June, the DFM general index was still up by 48.8% on the start of the year as of August 21. In July, Arabtec stock rose by 63%, though it remains a volatile stock with investors anxious over news

about the sale of Ismaik’s stake.The SCA’s sanguine message is that such

market fluctuations are normal financial market movements. The UAE regulator contends that following the record highs the markets recorded throughout last year and into the first quarter of this year, there would inevitably be waves of correc-tions. It says this is especially likely to have occurred in the wake of the UAE market upgrade by the MSCI index as shares of some companies listed on the index are exposed to price fluctuations as a result of new investors, including major financial institutions, entering the market.

Indeed, the new money proved a dou-ble-edged sword. The SCA notes that it led to rises in share prices but also exposed them, at the same time, to selling pressure from those institutions and from invest-ment portfolios. That could also explain the low rate of foreign investment in June compared with the previous month, which reflected in the form of systematic liquidity operations by some financial institutions that exceeded their approved lending capacity and the 4% margin call con-ducted by brokerage companies licensed to operate margin trading services.

Regaining composureAnalysts broadly agree that there is simply not the same sense of panic that infected the market in late 2009, when the Dubai World crisis triggered a decline in the mar-ket index by as much as a quarter.

Lakhotia says: “Obviously when the market went down 10% there were a lot of people who exited, particularly foreign institutions and retail investors. Such a fall also triggered margin calls and stop-loss limits that further aggravated the sell-off. When the market stabilises I would expect to see them coming back again.”

Significantly, the market volatility does not reflect deeper macro-economic concerns about the UAE, as the Dubai World crisis clearly did. Simon Williams, chief regional economist at HSBC, says: “The issues around Arabtec are not a true reflection of Dubai’s real economy, which I still see as strong and gaining momen-tum, not losing momentum. It feels more like a market phenomenon and will not affect investor sentiment in the broader economy.”

Investors will remain cautious about Dubai, but will not be shying away from the market completely. “At the end of the day Dubai has some quality names, some good stocks with strong earnings growth,” says Lakhotia. “There is good underlying momentum in Dubai and so long as there is not a real estate bubble, the Dubai index should continue to move higher.” g

“we saw some outflows of foreign money after the entry into mSCI but

that was arguably due to the overvaluation and the

exaggerated expectations that entry had created”

LOIC pELIChET, NBK CApITAL


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