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Arqaam Capital upbeat about MENA structural reform

Arqaam Capital, a specialist emerging and frontier markets investment bank, says it sees positive mediump to long-term impact from structural reforms in the Middle East and North Africa region

The bank on 19 September  inaugurated its third MENA Investors Conference in Dubai, coinciding—as analysts saw—with a time of change and reform in the MENA region.

The prolonged oil oversupply, which may extend into the first half of 2017, has already hit the oil exporters in the MENA region, but has driven the local governments to press forward with much needed reforms, says the bank in an assessment published on its website and elsewhere. These reforms will weigh heavily on economic growth over the next couple of years, though they should also set a more solid base which will propel the region into more growth going forward and present an attractive opportunity for investors and corporates.

Speaking on the sidelines of the conference Tarek Lotfy, Arqaam Capital’s President GCC, said, “Despite the recent stabilization in the oil price, which has reduced tail risks, we believe that governments in the GCC will have to continue to gradually reduce fiscal and external imbalances in their economies, seek additional revenue streams and prioritize spending. This will impact businesses operating in the region, while also changing the competitive landscape.”

“Unprecedented institutional changes could soften the downturn, while also creating new business opportunities. For example, we view the steps that the kingdom of Saudi Arabia has been taking towards fiscal consolidation positively. A larger role for the private sector and diversifying sources of deficit financing through the kingdom’s planned bond issuances are especially encouraging.”

“With regards to Egypt, a strong devaluation and a comprehensive reform agenda may initially lead to some margin compression, but it should also enhance the medium to long-term outlook. The unlocking of capital spending should support an outlook of accelerated growth, with investors already positioning themselves for that bright future.” Mr. Lotfy added.

Wafic Nsouli, Managing Director, Cash Equities at Arqaam Capital said: “The upgrade of a number of key markets to Emerging Markets status in international indices has structurally increased liquidity and interest in the GCC markets, while changes in other frontier markets should also give MENA a much more prominent weight in that category. Interest in Pakistan is already increasing as it will be included in MSCI EM index in May 2017, and we are glad to host Pakistani companies at our conference for the first time. Equally important, faster than expected progress in the Saudi market may lead to EM inclusion sooner rather than later.”

Over the two days of the conference, Arqaam planned to bring together the senior management teams of over 70 Middle Eastern and North African listed companies and more than  100 investors for a series of high-value one-on-one and small group meetings. Participants represented a wide array of sectors including financial services, telecommunications, real estate and hospitality, consumer staples, energy and industrials.

Author: Editor

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