Arab investment overseas will rise, say experts
Arab investment overseas, whether through government-owned portfolios or oil stabilisation finds, will continue to rise through shrewd allocation of funds, according to speakers at the upcoming IPO and Asset Management Middle East conference, organised by MEED, in Dubai on March 27 – 28.
GCC investments abroad have come under the spotlight in the last 12 months, notably with Dubai-based DPI World’s purchase of P&O, the UK port and ferry operator. This follows on from a series of high-profile investments by Dubai government-owned institutions that have grabbed international headlines.
More than $5 billion has already been spent in the last 12 months adding to a strong foreign portfolio that now includes the Tussauds Group, the UK’s Inchcape Shipping Services and a billion-dollar stake in DaimlerChrysler. In late January, Dubai International Capital (DIC), the international investment arm of Dubai Holding, announced plans to set up a $15 billion fund to invest in global blue-chip firms.
Peggy Farley, president and CEO of the US-based Ascent Capital Management, said: “The high-profile investments we have seen are part of an ongoing diversification of the Gulf economies.
“While Dubai’s investments have made headlines, Abu Dhabi and Kuwait have channelled a percentage of their income into the global equity, bond and real estate markets through Abu Dhabi Investment Authority and Kuwait Investment Authority.
“Dubai has leveraged a mass of equity from the proceeds of land sales to feed the booming real estate market, and these judicious investments will continue both at home and abroad.”
Acquisitions by Dubai have been highly leveraged, utilising international bonds and local bank debt. As an example, Dubai Ports, Customs & Free Zone Corporation in January issued a $3.5 billion sukuk – the world’s largest – designed primarily to fund the P&O purchase.
In January, the UAE-based investment company Istithmar acquired 109 million shares, or 2.39 per cent, of Time Warner Inc. for $2 billion; the previous November, the same company bought New York property 230 Park Avenue for $705 million.
Abu Dhabi Investment Authority has built up an impressive portfolio in the two decades since it was set up by the late UAE President, Sheikh Zayed bin Sultan al Nahyan to diversify the oil-dependent economy. It is now the world’s second largest institutional investor, with assets estimated to be well in excess of $300 billion. Meanwhile, the Abu Dhabi-based Mubadala Development Company acquired 5 per cent last year of Ferrari last year.
The Saudi Arabian General Investment Authority (SAGIA) estimates that the Kingdom’s private sector invests approximately $5 billion abroad, while Kuwait has as much as $250 billion invested across Europe.
At the recent World Economic Forum in Davos, Kuwait Investment Authority (KIA) confirmed plans to buy a 10 per cent stake in Industrial & Commercial Bank of China. Its partners are understood to include Abu Dhabi and Qatari investors.
Conference chairman Edmund O’Sullivan said: “Gulf countries have liquidity levels that are rising by the day, thanks to shrewd investment of petroleum income over the years, and rising oil prices.
“GCC money is flowing around the region and on an international stage, while foreign direct investment into the GCC continues to rise – it rose 91 per cent to $9.95 billion from the United States alone in 2005.”
The Middle East’s spiralling IPO market, which is tipped to number well over 100 listings by 2008, and market predictions make up the agenda for MEED’s IPO and Asset Management Middle East conference in Dubai, March 27 – 28.
This year the event has been extended into the IPO sector for the first time, with delegates able to attend both days or just one, according to their area of focus.
Already confirmed as speakers are: Sheikha Lubna bint Khaled Al Qasimi, the UAE’s Minister of Economy and Planning; Dr Henry Azzam, chairman of Dubai International Financial Exchange (DIFX) and Dr Habib Al Mulla, chairman of Dubai Financial Services Authority.
MEED’s IPO and Asset Management Middle East will be held at the Al Murooj Rotana in Dubai, March 27 – 28.
Gold sponsors are Dubai Bank and Shuaa Capital.