Arcapita Bank B.S.C.(c), a leading international investment firm headquartered in Bahrain, today announced the release of an Economics Intelligence Unit research report, sponsored by Arcapita, which examines the factors driving the increasing flow of capital from the Gulf into Asia. The research determines that globalization, economic synergies and changing risk appetites are resulting in expanded Gulf investment into Asia.
Gulf-based investors have become increasingly active in Asia in recent years, and the trend looks set to continue over the medium term, according to “Near East meets Far East: the rise of Gulf investment in Asia”. The research suggests that the proportion of petrodollar investment going into the Asian region (estimated currently to be around 10% of total Gulf outward investment) will increase significantly over the next five years.
"Whilst we fully expect that our investors will continue to demand high-quality alternative investments from the mature economies of Europe and the United States, introducing opportunities from the growing Asian economies is a natural way for Arcapita to offer further diversification through access to these high- growth markets,” says Atif Abdulmalik, CEO of Arcapita. “Our investment teams based in the Gulf, and in our Singapore office, are well positioned to source and evaluate these opportunities.”
The research highlights several trends that have underpinned the rising interest from investors in the Gulf Co-operation Council (GCC) countries in Asian assets.
The Gulf is witnessing a change in its investment preferences. In previous oil booms, much of the Gulf’s excess liquidity was placed in the international banking system and US treasuries, and the rest invested cautiously in portfolios that tended to favor capital preservation over yield maximization. But that has now changed. "What we are seeing today is that GCC sovereigns are increasingly managing their own surpluses directly, rather than outsourcing that process," says Matthew Shinkman, editor of the report. "At the same time, the past decade has witnessed rising sophistication in the GCC investment community, and deepening integration of emerging markets into the world economy, leading to a growing appetite among GCC investors for Asian assets."
A number of changes in Asia are making investment in the region more attractive. Asian countries have made substantial progress in recent years in liberalizing their capital accounts, strengthening their business environments and improving conditions for foreign investors. Real GDP growth in the region has also been robust over the past five years, and growth has in part been driven by big, long-term public investment programs, which have opened up a wide new array of opportunities for Gulf investors.
There has been a significant strengthening of links between the GCC and Asia. In the past five years, trade volumes between the GCC and Asia have tripled, and without question, much of the incremental demand for Gulf exports — not just oil and gas but also petrochemicals, base metals, and services like finance and tourism—will come from Asia. The GCC has seen large inflows of migrant labor from Asia, creating both a growing source of private capital flows between the regions, as well as an increased cultural overlap.
In addition, geopolitical trends are favoring strategic diversification. Traditionally, the Gulf states have aligned themselves closely with the US, for both economic and strategic reasons, and this will remain the case over the short term. Over the longer term, the region’s increased interest in Asia is a natural extension of its aim to diversify the nature of its economic activity. Equally, there is a recognition that should current economic and consumption trends continue, future relationships with the leading Asian nations will take on major strategic importance.
“Near East Meets Far East: the rise of Gulf investment in Asia” is available free of charge at www.arcapita.com and www.eiu.com/gulfinvestment.
About Arcapita
Headquartered in Bahrain with offices in Atlanta, London and Singapore, Arcapita’s four principal lines of business are corporate investment, real estate investment, asset-based investment and venture capital. To date, the Bank has completed 63 transactions with a total value of almost $21.0 billion and has exited from 17 portfolio investments for a total transaction value in excess of $3.8 billion. Arcapita’s mission is to provide innovative and distinctive investment opportunities that generate superior risk-adjusted returns whilst adhering to Islamic principles.
Full details of Arcapita can be found at www.arcapita.com
About the Economist Intelligence Unit
The Economist Intelligence Unit is the world leader in global business intelligence. It is the business–to–business arm of The Economist Group, which publishes The Economist newspaper.
The Economist Intelligence Unit provides geopolitical, economic and business analysis on more than 200 countries, as well as strategic intelligence on key industries and management practices. With over 300 full–time professionals in 40 offices around the world, supported by a global network of more than 700 contributing analysts, the Economist Intelligence Unit is widely known for its unparalleled coverage of major and emerging markets. More information about the Economist Intelligence Unit can be found on the Web at www.eiu.com.
