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Dubai’s Arqaam Capital Eyes South Africa, Saudi Expansion
May 15, 2013 5:59 by Reuters
Dubai-based investment bank Arqaam Capital plans to expand into sub-Saharan Africa by the fourth quarter this year and may look at acquisitions in Saudi Arabia as part of its push into fast-growing emerging markets, its chief executive said.
Gulf investors, flush with petrodollars and facing limited growth options at home, are stepping into other frontier and emerging markets in Africa and Asia to get a foothold in debt and equity markets.
“We’re also making a push into sub-Saharan Africa, basically the triangle of South Africa, Kenya and Nigeria. The plan is to open an office in South Africa by the fourth quarter of 2013,” Riad Meliti told Reuters in a interview.
“This is driven by the growth rate in those markets, opportunities, stock market development, the undervalued stocks and lack of information on companies,” he said.
The four year-old investment bank, which has offices in Dubai, Beirut, Libya and Egypt, is also looking at the best entry point into Saudi Arabia and will not shy away from acquisition opportunities in the largest Gulf Arab economy.
“Organic and inorganic options are available but it all depends on the right opportunity,” Meliti said.
Arqaam capital sees itself as a frontier and emerging market investment bank taking advantage of the flow of money into these markets. The firm currently offers research on 121 stocks across the Middle East and aims to capitalize on investor interest and extend its research coverage to 150 by the end of the year.
“If Tadawul (the Saudi stock exchange) is classified as emerging market, it will attract 5-10 percent of the MSCI, which is $65 billion out of the $1.3 trillion index,” Meliti said, referring to the possibility that Saudi Arabia could be added to influential MSCI Emerging Markets Index for investors.
Saudi Arabia’s stock market is currently not open to direct investments by foreigners but the kingdom is finalising a framework to allow foreign ownership, the head of the market regulator said earlier in May.
According to research by Arqaam, $1.3 trillion of liquidity was allocated to emerging markets in 2012 compared with $200 billion in 2002. In the frontier market world, it was $5 billion in 2002 and is currently close to $100 billion.
Arqaam earlier this year hired ex-Credit Suisse banker Wafic Nsouli to head its institutional equity sales unit, tapping talent from retrenching global banks for its expansion.
Arqaam last year bought Libyan financial services firm Al Rashad Finance and Management Advisory to tap into economic growth as the country rebuilds after civil war.
It also bought Egyptian brokerage firm El Rashad Securities in January.
“We are optimistic on the medium term in Egypt. It’s the right time to position yourself to add value to people who might require the service of financial intermediation,” Meliti said.