Markets in the GCC and the broader Mena region are on the right growth trajectory and the flow of deals for investment banks is likely to continue even after goals of the economic diversification programmes are achieved, a senior Morgan Stanley executive has said.
The basic ingredients, in terms of policy and regulatory frameworks, are in place for the regional economies to continue growing and there is no reason why the trend should not continue, Clare Woodman, Morgan Stanley’s head of Europe, Middle East and Africa, told The National in an interview.
“All the factors that are required to develop and build out markets, to enable society to enjoy good infrastructure, good-quality standard of living, are all there,” she said.
“There's a lot of support and alignment from … the government where it's needed to help these initiatives and I think absolutely the ingredients are there for one to expect to see the trend, the growth trend, continue.”
Global headwinds and economic uncertainty, however, could dampen growth and subsequently the flow of deals, added Ms Woodman, who is also chief executive of Morgan Stanley International.
Morgan Stanley and other global and regional investment banks have seen a rise in debt and equity capital market deals, as well as mergers and acquisitions, which has pushed them to boost their presence in the region.
The US-headquartered bank, which has been present in the region for the past 18 years, has opened a new office in Abu Dhabi, expanding its footprint in the region to better serve its growing client base.
Morgan Stanley's new Abu Dhabi Global Market-based operation will complement its offices in Dubai, Riyadh and Doha and will help boost its institutional business, which offers corporate banking, sales and trading services.
“We will be able to support those clients locally … but we'll also be able to facilitate better access and differentiated service for our global clients who are following the developments in this region and in Abu Dhabi and want to be part of this continued growth story that we've seen over the last couple of years,” Ms Woodman said.
Governments in the region, particularly in the six-member economic bloc of GCC, are pursuing their economic diversification strategies that have boosted deal flows across markets in the past few years.
Saudi Arabia, the Arab world’s biggest economy and Opec’s top oil producer, is implementing its Vision 2030 programme, an overarching economic and social reform agenda that seeks to increase foreign investment to 5.7 per cent of its GDP by the end of this decade. Boosting the private sector’s contribution to 65 per cent of GDP and inclusion of the kingdom in the 15 largest global economies list by 2030 are among the objectives.
The UAE is also pursuing economic diversification goals under its own 2030 growth strategy. At emirate level, Abu Dhabi and Dubai are running their own agendas to boost their industrial, base, open new sectors of economy for foreign investment and increase the contribution of non-oil economy to their overall GDP.
With the government push for privatisation, one of the central planks of economic diversification agendas, markets in the GCC have seen a boom in IPO activity in the past few years.
Last year, the UAE topped the economic bloc in terms of the funds raised, as issuers secured $6.07 billion from eight listings on UAE exchanges, accounting for 56.3 per cent of total proceeds raised in the region, according to data from Kamco.
Companies raised $3.5 billion on the Saudi Exchange (Tadawul) with 35 offerings, recording the highest number of IPOs in the GCC last year and 35 per cent of total proceeds.
Despite a slide in value and volume, the broader Middle East region along with China were the bright spots in the global IPO market, according to PwC’s Global IPO Watch 2023 and Outlook for 2024 report.
The momentum is continuing this year, with Tadawul stock exchange’s 2024 IPO pipeline growing by 30 per cent year on year.
There are currently 56 big and small companies looking to raise funds by floating their shares on Tadawul’s Main Market and its Nomu-Parallel trading platform, the kingdom’s Capital Markets Authority chairman Mohammed El Kuwaiz said this month.
In terms of mergers and acquisitions, the value of announced M&A transactions slid 7 per cent on an annual basis in the broader Mena region, hitting $80 billion last year.
Although down 18 per cent from 2022’s all-time record annual tally, the volume of deals last year reached the third-highest level since 1980, Zawya reported, citing London Stock Exchange Group’s Mena investment banking data.
Financial institutions and large corporations, as well as government-related entities and sovereign funds in the region, have consistently tapped debt markets to fund growth plans that have also kept investment banks busy over the past few quarters.
The changing growth dynamic means some of the regional markets that have historically been exporters of capital are now recipients of foreign funds.
“Given the evolution of the ecosystem here, the economic growth, social reforms, new entrants into the market … in terms of the alternative asset management community, what we're actually seeing is … the desire from global investors to put investment flows here,” Ms Woodman said.
“So, you're seeing this sort of two-way flow of capital and I think that is incredibly interesting.”
Combine that with the push by the regional issuers to raise capital to fund and support infrastructure, enhancements and development, and “it's an exciting place to work, to be in and grow your business and allow your business to thrive”, she added.
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Liverpool's all-time goalscorers
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5pm: Maiden (PA) Dh80,000 (Turf) 1,200m, Winner: ES Rubban, Antonio Fresu (jockey), Ibrahim Aseel (trainer)
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Why seagrass matters
- Carbon sink: Seagrass sequesters carbon up to 35X faster than tropical rainforests
- Marine nursery: Crucial habitat for juvenile fish, crustations, and invertebrates
- Biodiversity: Support species like sea turtles, dugongs, and seabirds
- Coastal protection: Reduce erosion and improve water quality
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
SPEC SHEET
Display: 10.9" Liquid Retina IPS, 2360 x 1640, 264ppi, wide colour, True Tone, Apple Pencil support
Chip: Apple M1, 8-core CPU, 8-core GPU, 16-core Neural Engine
Memory: 64/256GB storage; 8GB RAM
Main camera: 12MP wide, f/1.8, Smart HDR
Video: 4K @ 25/25/30/60fps, full HD @ 25/30/60fps, slo-mo @ 120/240fps
Front camera: 12MP ultra-wide, f/2.4, Smart HDR, Centre Stage; full HD @ 25/30/60fps
Audio: Stereo speakers
Biometrics: Touch ID
I/O: USB-C, smart connector (for folio/keyboard)
Battery: Up to 10 hours on Wi-Fi; up to 9 hours on cellular
Finish: Space grey, starlight, pink, purple, blue
Price: Wi-Fi – Dh2,499 (64GB) / Dh3,099 (256GB); cellular – Dh3,099 (64GB) / Dh3,699 (256GB)
The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km
Company profile
Company name: Nestrom
Started: 2017
Co-founders: Yousef Wadi, Kanaan Manasrah and Shadi Shalabi
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Sector: Technology
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Investors: Propeller, 500 Startups, Wamda Capital, Agrimatico, Techstars and some angel investors
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SUZUME
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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MATCH INFO
Norwich 0
Watford 2 (Deulofeu 2', Gray 52')
Red card: Christian Kabasele (WatforD)
