Eurozone crisis could be good news for GCC
The current European financial crisis will impact the GCC in a very meaningful way, a leading industry expert has said.
According to J.P. Morgan Middle East and North Africa Chief Executive Sjoerd Leenart, although it may not be through lending, the crisis may have a positive impact on the GCC region, diverting capital flows and providing interesting investment opportunities for GCC companies.
Mr. Leenart made the comments at Bahrain Association of Banks' (BAB) Annual Gala Dinner at the Ritz Carlton Hotel in Manama last evening.
"Firstly, we hope and believe that in 2013, the relative strength in the US and China will give investors some confidence and should support Europe in making small steps of progress," he added.
"Secondly, the real effect of the European banking crisis cannot be witnessed in full as it is mitigated by the cheap liquidity provided by the European Central Bank and governments," averred Mr. Leenart.
"As a result, the $2 trillion deleveraging process has only just started and will take many years. This will not be a dramatic event but more a slow burn, where capital will be tight so lending will be selective and priced to give adequate returns."
"Thirdly, while we think the crisis in Europe has a significant impact on the GCC, we don't think the decline in cross-border lending is the biggest fall-out, as it can be absorbed by a global institutional investor base that is awash with liquidity. Investors want to get exposure to new markets such as the GCC, so to the extent we offer it in the right format and under the right conditions, appetite will be significant," concluded the chief executive.