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Saudi Arabia leading investment destination in MENA region

JEDDAH – “Markets such as Saudi Arabia, Qatar and the UAE appear increasingly popular as investment destinations,” a FTSE global survey, undertaken in conjunction with the Qatar Financial Centre Authority ( QFCA ) showed.

The survey of 90 institutional investors across 12 countries in the MENA region also found rapid shifts in market and asset allocation, which up to now have favored bonds and private equity investments, to growing cross section of investible product, including mutual funds, hedge funds, exchange-traded funds and money market instruments.

On investors’ response whether political risk in the MENA region would improve or worsen over the coming year, the survey found that investors in Saudi Arabia, the UAE and Qatar are the least concerned, while Syria, Lebanon and Jordan concerned investors most.

Clearly, a paradigm shift in the mobilization of capital is underway in the region, influenced by political risk, the rise of localized liquidity pools (but not necessarily residing in national stock exchanges) and a growing adherence to sophisticated collateral and risk management techniques, it said.

“Positive attitudes toward Qatar substantially reflect the careful evolution of its legal, regulatory and tax environment in the light of regional and global changes and the maturing of its financial sector,” Yousef Mohamed Al-Jaida, chief strategic development officer, QFCA , said.

The latest survey shows how investor sentiment toward the region is influenced by global as well as regional trends such as shifts in flows of trade and capital, he added.

At a time of immense market change in the global investment market as new institutions and regulations impinge on national and regional investment regimes, and a global economy still mired in the aftershocks of the 2008/09 financial crisis, the asset management industry in the MENA region is poised on the brink of a new era, the survey said.

“This important survey monitors the increasingly rapid evolution of the asset management industry in the wider MENA region, looking at how macro and regional factors continually exert their effects on the asset allocation, business solutions and business infrastructure,” the survey said.

One of the survey’s most important findings is investors’ assessment of risk in the MENA region. The first quarter 2013 survey showed that investor sentiment is increasingly factoring in heightened risk, it said.

In the MENA region, continuing political unrest in North Africa and the Levant is “very likely to further concentrate assets in more stable economies and cause attendant cross-border capital flows”, it said.

“Heightened political risks in the MENA region have two effects: the concentration of assets in those countries that are deemed more stable, and a shift in the types of assets employed, said Andrew Neil, head of Research and New Media, FTSE Global Markets.

“It is no surprise then that in the more stable markets in the GCC investors are increasingly looking at equity-based investments and in the riskier markets in the North Africa and Levant bonds seem to be the investment vehicle of choice, particularly the relatively safe haven of sovereign bonds,” he added.

© The Saudi Gazette 2013, Feb 23 2013

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