The quarterly survey of the asset management industry in the Middle East and North Africa region has three aims: to describe the investment outlook of a diverse range of asset management firms in the Middle East region; to assess the perception of political/economic risk within the region and to outline current thinking among the asset management industry as to what infrastructure is important to the proper functioning of their businesses. These elements still remain core to the findings in each quarterly survey. Even so, each has its own character: in part determined by macro-issues; in part determined by the range of respondents.
The third iteration of the Middle East Asset Management survey, which we undertake under the auspices of the Qatar Financial Centre Authority (QFCA), brings into vivid relief a number of important trends. Bifurcation in investment approaches has become stronger over the last two quarters: domestic investors are investing more domestically and international investors are increasing their cross-border allocations. Two, civil and political unrest continues to impact selected markets, with Lebanon, Jordan, even Kuwait feeling an investor pinch as local asset managers upscale their risk assessments on these countries. Bahrain and Egypt too continue to feel the repercussions of the Arab Spring; however a move towards more positive investor sentiments is apparent. In contrast, investors continue to be optimistic about Saudi Arabia, Qatar and Oman in the region; and about South America and Africa outside it. Dubai too has benefitted as investors and corporations have uprooted and moved in many instances to the UAE. The survey also throws up interesting news for international providers of securities services in the MENA region. HSBC emerges as a clear regional front-runner among the 83 investors polled. Among the key trends to watch are growing investor frustration with constrained liquidity and inadequate regulation covering the region’s capital markets, which they say, will have long term effects on the efforts by individual markets to develop as regional financial hubs. Research by Henry Blanchard, Lydia Koh and Rebecca O’Brien.
In issue 60 we kicked off a year-long review of the Middle East asset management industry and its risk outlook for 2012/2013. The year long survey, which comprises polling of a cross section of investment firms located in the region mixed with more informal comment, has three aims: to describe the current investment outlook of a diverse range of asset management firms in the Middle East region; to assess the perception of political/economic risk within the region and to outline current thinking among the asset management industry as to what infrastructure is important to the proper functioning of their businesses. Three months on from the first survey (please refer to issue 60, page 56) set the underlying scene. Subsequently, we spoke to 47 out of the original 79 respondents to see whether the risk outlook for the region had altered. We will provide a further update in the October edition. This short snapshot concentrates on the way that institutional investors in the Middle East and North Africa region view political and economic risks.
At a time of huge change in the international investment markets, and the continuing challenge of a global economy still mired in the aftershocks of the 2008-2009 financial crises, the asset management sector in the Middle East is on the brink of a new era. That epoch will hopefully involve a deepening of the asset management segment. However, given continuing market uncertainties and the still bubbling brook of popular discontent in some countries in the region, meaningful moves towards market change might just as easily be cut down by the vagaries of socio-political fortune (which vary so widely across the region). Whatever the outcome (and it will be different in each country), if any nation wants to develop a top ranking financial centre in this century, then a significant strengthening of the asset servicing and asset management industry must form part of any meaningful strategy. This survey goes part way to underscoring the importance of this fact.