April 2015
www.wealth-monitor.com
VOLUME: 01 | ISSUE: 01
Wmonitor
EALTH
Face Value
Fathi Ben Grira, CEO,
MENACORP
Get Your Money’s Worth
RETAIL
CONUNDRUM
Does the surge in online retail
in the region ring alarm bells for
brick-and-mortar retailers?
AD
D TO
CA
RT
Mastering the Markets
BU
Y
Short Selling
Blue Chip
Peer-To-Peer Finance
Taking Stock
Islamic Credit Cards
Technology Trendz
Mobile Wallet
Bulls vs Bears
Crude Shock and Stocks
B a h r a i n : B D 1 . 5 0 | Ku w a i t : K D 1 . 2 0 | O m a n : R O 1 . 5 0 | Q a t a r : Q R 1 5 | S a u d i A r a b i a : S R 1 5 | UA E : A E D 1 5 | U S $ : 5
A clear EDGE
16
Why physical retail would continue to dominate in the region despite the
surge in online shopping
CONTENTS
P.
S-F / Shutterstock.com
P.40 Blue Chip
Peer-to-Peer Finance
12
P.
Have the crude oil prices and the
Gulf’s markets really decoupled?
P.44 What’s Not
Pressure on EM Currencies
Bulls vs Bears
35
P.
Global View
The outlook for the global economy
P.48 Dashboard
Data on M&As, PE Deals and IPOs
P.56 The Last Laugh
The Big Drop
www.wealth-monitor.com | April 2015
Major News Stories From Around the
Region
P.23 Markets Cosmos
News and data on Precious Metals, Base
Metals, Energy, Agri/ Soft, Currencies,
Arabian Bourses and Global View
P.42 Markets Rewind
Amazon’s Journey
P.43 What’s Hot
US Equities Power Ahead
P.45 Mastering the Markets
CONTENTS
P.04 Opening Bell
P.
10 Face Value
Interview with
Fathi Ben Grira, CEO,
MENACORP, Dubai
46 Technology Trendz
P.
32
P.
No Shortcuts
38
P.
Exploring Islamic
Credit Cards
28
P.
Pain Of Low Oil Price May Persist
Why Grain Prices Are
Expected To Soften
30
P.
April 2015 | www.wealth-monitor.com
Mobile Wallet
APRIL 2015
VOLUME: 01 | ISSUE: 01
Wmonitor
EALTH
Get Your Money’s Worth
www.wealth-monitor.com
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Arshad Khan | arshad.khan@semantics.ae
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EDITOR’S FLOOR
I
t gives me immense pleasure to launch the first ever issue of Wealth
Monitor! We hope you’ll enjoy reading the first issue and the subsequent
ones.
“What makes eBay successful…is the community. It’s the buyers and sellers
coming together and forming a marketplace,” Pierre Omidyar, the founder of
ebay, the California-based world’s largest online auction site so remarked once.
Things are not much dissimilar in the GCC region too if you reckon the pace
at which online retail has been evolving, or say burgeoning, buoyed by the
increasing preference of consumers, especially the younger generation, to
shop online.
The UAE has long been a trading hotspot. There was a time when the
traditional souks dotted the region, and you can still relive their hustle and
bustle. As the years went by, glitzy shopping malls rose up out of the Arabian
sands as another platform to buy and sell. Both the souqs and shopping malls
have continued to flourish together for years without encroaching on each
other’s turf. Fast forward a bit and here is another version of buying and selling
— online shops that’s fast catching the fancy of buyers. But will brick-andmortar stores and malls in the UAE and the region lose out as online shopping
grows?
As our cover story points out, the skepticism is misplaced. No doubt,
sales through online shopping portals are surging at one of the fastest rates
globally, buoyed by growing number of Internet-savvy consumers and a
high penetration of smartphones and tablets, but even as online shopping is
becoming a bigger piece of the retail pie, it by no means signifies decreasing
role of mega malls in total retail sales. There’s enough room for both physical
and online retail segments to expand. And that’s essentially because shopping
through the Internet still comprises a minuscule of the entire retail sales pie
in the region. Rather than competing against each, online retailing is in fact
supplementing physical retail here.
The red flag though is resistance or ignorance to evolve and this is true for
both players. The one that doesn’t evolve stands to lose out and runs the risk
of being marginalized.
Our inaugural issue also includes conversations with Mr Fathi Ben Grira, CEO,
MENACORP, one of the leading financial services groups in the whole Middle
East and North Africa (MENA) region. In the section, ‘Face Value’, Grira discusses
on the overall financial markets and outlook of the region.
Also, be part of the debate in the ‘Bulls Vs Bear’ section, where three experts,
viz., Muhammad Shabbir, Head of Equity Funds And Portfolios, Rasmala
Investment Bank, Dubai; Rajiv Kumar, Dy CEO, Phillip Futures DMCC, Dubai;
and MR Raghu, Senior VP-Research, Kuwait Financial Centre, deliberate on the
correlation between the crude oil prices and GCC’s stock markets.
Till the time, it’s happy reading!
ARSHAD KHAN
Editor in Chief | arshad.khan@semantics.ae
www.semantics.ae
April 2015 | www.wealth-monitor.com
wealthmonitor
wealth_monitor
wealth-monitor
OPENING BELL
News
In Numbers
48%
The growth in net profit of Dubai Airport Freezone Authority
(DAFZA) in 2014 compared with the previous year.
“DAFZA’s strong performance in 2014 reflects our
commitment to effectively contribute to Dubai’s
economic development and solidify the leadership of
Dubai as a global hub for business and investment.”
HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman, DAFZA
$300b
Exports from the MENA oil
exporters will be reduced by
$300 billion in 2015, according
to IIF.
AED 759.3m
The net profit recorded by Dubai
Financial Market in 2014, compared
with AED 284.6 million in the previous
year.
4
107%
Total revenues increased 107% to AED
936.7 million in 2014, compared to AED
453.1 million in 2013.
3.7%
The fall in Dubai’s apartment prices in first 6 weeks of 2015
compared to the previous quarter, according to the report by
real estate advisory firm Phidar Advisory.
60,565
The number of Ultra High Net Worth
Individuals (UHNWIs) in Europe, home to
the highest number of UHNWI’s globally,
followed by North America and Asia,
with 44,922 and 42,272 respectively,
according to data compiled for Knight
Frank’s Wealth Report by WealthInsight.
Asia will overtake North America as the
second biggest hub for UHNWIs over
the next ten years, fuelled by the rising
UHNWIs populations in China and India,
the report said.
www.wealth-monitor.com | April 2015
OPENING BELL
Drop of Light / Shutterstock.com
15%
“2014 was another successful year for FGB,
marking 15 years of uninterrupted net profit
growth for the bank. Our financial results
for 2014 are testament to the success of our
restructuring efforts and focus on enhancing
capabilities and synergies across our core
businesses.”
André Sayegh, CEO, FGB
The increase in average
sales rates for apartments
in Abu Dhabi in 2014,
according to a report by
Asteco. Investors in Abu
Dhabi’s real estate sector
can expect sustained
rental
growth
and
relatively stable capital
values in 2015, on the back
of a strong performance in
2014, it added.
$40b
For the GCC, the aggregated current
account surplus will shrink from $266
billion in 2014 to about $40 billion in
2015, and the fiscal position will shift
from a surplus of 4.6% of GDP to a deficit
of 7.4%, IIF estimates.
74%
The percentage of recruiters who
expect new job creation in the Gulf in
next 6 months of 2015, according to
Naukrigulf Hiring Outlook Survey.
98.2%
The percentage
of respondents
in the MENA who
find it important
to work for an
organization that
provides learning
and training, as per
a survey by Bayt.
com.
83%
The percentage of UAE employees
who believe the gratuity does not
provide enough funds to cover
retirement expenses, according to a
research by Zurich International Life.
22%
AED 180b
Exports and re-exports of Dubai Chamber
members to GCC countries rose from AED
17 billion in 1998 to more than 10 times in
the past 15 years to reach AED180 billion
in 2014, according to a report issued by
the Dubai Chamber of Commerce and
Industry.
April 2015 | www.wealth-monitor.com
The survey of 1,000 UAE residents
also found that only one in five
respondents (22%) will use their
gratuity towards the cost of funding
their retirement.
24%
Instead, almost a quarter of employees
(24%) plan to use their gratuity as a
deposit to buy a property, while 22%
will use it to pay off debt. Another 8%
will pay school fees, rent or another
bill, while 7% will spend their gratuity
on a holiday or large luxury item.
5
OPENING BELL
News That Made Headlines
Investcorp Portfolio
Company L’azurde
Distributes $16.7m Dividend
Bahrain Bourse-listed Investcorp, the
asset management firm specialising
in
alternative
investments,
announced that its portfolio company
L’azurde, one of the world’s top five
gold jewellery manufacturers, has
distributed $16.7 million in dividends
to its shareholders, following a strong
performance in 2014.
The Investcorp Gulf Opportunity
Fund acquired a majority stake in
L’azurde in 2009 alongside Eastgate
Capital and The National Investor, its
consortium partners. After the gold
price shock in 2010, a new strategy
for the business was developed
with the objectives to strengthen
its operations and ensure it
was positioned to maximise
its
growth
potential,
while being insulated
from difficult market
conditions and gold
price volatility. Since
that time, L’azurde has
been steadily increasing
its earnings, achieving
double digit year-on-year
growth.
FITCH UPGRADES 7 QATARI BANKS
Fitch Ratings upgraded the Long-term Issuer Default Ratings
of Commercial Bank of Qatar, Doha Bank, Qatar Islamic Bank,
Al Khalij Commercial Bank Qatar International Islamic Bank and
Ahli Bank to ‘A+’ from ‘A’. The upgrade of all the Fitch-rated Qatari
banks’ IDRs follows the publication of Qatar’s Long-term IDR of
‘AA’ on 6 March 2015, which provides greater clarity over Qatar’s
ability to provide support to the banking sector in case of need.
The Qatari banking sector is healthy. Local banks are highly
capitalised and asset quality is solid with non-performing loans
at less than 2% of total loans, Fitch Ratings said in a statement.
Credit growth has slowed as the government has moved to
directly financing projects from intermediating via banks. There
is a demonstrated strong government commitment to its banks
and key public-sector companies, it said.
AIR ARABIA ANNOUNCES 9% CASH DIVIDEND
Senohrabek / Shutterstock.com
6
Following the conclusion of its Annual General Meeting (AGM), the
Board of Directors of Air Arabia announced that the assembly has
approved the distribution of a 9% cash dividend of the company’s
share capital for the year 2014, equivalent to 9 fils per share.
For last year, the net profit of Air Arabia, the largest low-cost carrier
in the Middle East and North Africa, reached AED 566 million, up
30% compared to the year earlier.
Air Arabia’s total turnover for 2014 reached AED 3.7 billion, an
increase of 17% on 2013, driven by increased passenger numbers.
The carrier served 6.8 million passengers in 2014, up 12% compared
to previous year. Air Arabia served 6.8 million passengers in the 12
months ending December 31, 2014, an increase of 12% compared
to previous year. The low-cost pioneer’s seat load factor – or
passengers carried as a percentage of available seats – reached an
impressive 81% in 2014.
www.wealth-monitor.com | April 2015
OPENING BELL
Gold, Stocks, Bonds Less Attractive To Gulf-Based Uber Rich: Survey
The GCC-based High Net Worth Individuals
(HNWIs) prefer to invest more of their
wealth in their own business and the real
estate rather than in gold, stocks and
bonds, according to a survey “GCC Wealth
Insight Report 2015”, published by Dubaibased Emirates Investment Bank.
33% of HNWIs surveyed preferred to
allocate their wealth in their own business
and 30% in the real estate, compared
to 17% in cash/deposits, 6% in direct
investment/private equity and stocks,
5% in gold/precious metals, and just 3%
in bonds. GCC HNWIs are however more
positive about the economic situation in
the Gulf region than globally, with 55%
saying the economic situation in the Gulf
is improving compared to 31% saying the
global economy is improving.
The GCC Wealth Insight Report 2015
is based on a survey of HNWIs from the
United Arab Emirates, Qatar, Kuwait, Saudi
Arabia, Oman and Bahrain. The survey was
undertaken in the fourth quarter of 2014,
a period that recorded the start of falling
oil prices, but did not capture the lowest
levels.
Respondents were more cautious
towards the global economy compared
to last year, with the view that the global
economic situation is worsening almost
doubling (29%) on last year (16%).
Nonetheless, the Report’s findings
were optimistic about the longer-term
prospects for both the Gulf region and the
global economy; 86% say they are very or
somewhat optimistic about prospects for
the Gulf region over the next five years
with 78% saying the same thing for the
global economy.
The more cautious approach to the
global economy taken by regional HNWIs
is matched by an increasing preference
to keep assets closer to home, which has
risen 19 percentage points since last year
to 83%. Those who prefer to keep assets
closer to home are most likely to say the
main reasons are confidence in the stability
of their local economy (39%) and a desire
to have greater personal control over their
investments (20%).
Regional HNWIs are also more likely to
April 2015 | www.wealth-monitor.com
have a local rather than international
bank to help manage their wealth
compared to last year, with 80%
saying they prefer to use a local
bank compared to 59% last year.
Respondents said they believe that
local banks provide easier access, have
a better understanding of the local
market or regulations, and are safer.
The top four factors for selecting a local
bank have not changed since last year
– HNWIs look for level of service, bank
reputation and brand, fees and pricing,
and investment expertise and global
access.
Philanthropy has also featured
prominently in GCC countries in this
year’s survey, with 86% of respondents
saying they dedicate a portion of their
wealth to charitable giving, mostly to
humanitarian charitable causes. 60%
of those HNWIs who currently allocate
a portion of their wealth to charity are
planning to increase their distribution
to charity in the near future.
A large majority of GCC HNWIs
(84% this year and 90% last year) are
persistently more focused on growing
than preserving their wealth, the
survey found.
Amlak Finance’s Net Profit at AED 59m
Amlak Finance, a Dubai-based real estate
financier in the Middle East, recorded net
profit attributable to its equity holders (after
non-controlling interest) of AED59 million in
2014. The financial results announced were for
the year ending on 31st December 2014, after
six years of market absence. The last time the
company published its financials was in 2008,
when it recorded net profits attributable to
equity holders of AED240 million.
According to WAM, total Revenue fell by
two thirds since 2008 as no new assets were
written during the six years of restructuring
negotiations. Total operating expenses fell
by 45% between 2008 and 2014 as a result
of cuts in business related activities and staff
headcount.
Ali Ibrahim Mohammed, Vice Chairman
of Amlak Finance, said, “The year 2014
was a significant turning point for Amlak
Finance. Firstly, we achieved profits for our
shareholders, marking a positive turnaround
in our business. We closed a long and complex
financial restructuring amicably with our
financiers under the guidance, and with the
valuable support, of the UAE Government and
the Steering Committee.
7
OPENING BELL
NATIONAL BONDS’ PRODUCTS GIVE
UP TO 4% RETURNS
10 Years of Innovation and Education
National Bonds, the sharia-compliant
savings and investments schemes provider
in the UAE, has announced that its savings
and investments products provided up to
4% annual returns to customers in 2014,
outpacing the returns provided by other
competitive financial institutions in the UAE.
National Bonds revealed that its One Year
Term Bonds offered 2.50% annual returns
while the Savings Bonds provided 1.20%
annual returns in comparison to other
savings accounts in the UAE, according to
WAM.
The longer the saving period for principal
deposits held with National Bonds, the
higher the annual returns. For instance, the
total returns on saving for nine years with
National Bonds amount to 56.81%, while
saving for five years awards 13.82% in total
annual returns. Savers investing AED100,000
and above enjoy 2.36% annual returns, while
those saving amounts of AED10,000 and
below receive 1.44% annual returns. National
Bonds also offers the three year Step-up
Bonds that provide an annual profit rate of
4%.
National Bonds is audited by the Dubai
government’s audit department and is
supervised by an independent fatwa and
sharia supervisory board, in addition to
external auditing entities.
DFM ENROLLS BROKERAGE FIRM
8
Dubai Financial Market (DFM) has
accredited Al Hadaf Financial Securities
to provide Margin Trading service, lifting
the total number of DFM brokerage firms
providing this service to 25 companies.
Margin Trading permits brokerage
Over the years, the Middle East
Retail Banking Forum and Expo has
successfully brought together banking
professionals from across the region
to learn about the latest innovations
within the industry. In April, the event
will be celebrating its 10th anniversary
with an expanded format with new
and exciting features that will keep
more than 1,000 industry professionals
engaged.
New Venue, New Format, New
Features
In keeping with celebrating such a
milestone, the 10th Middle East Retail
Banking Forum and Expo has moved to
a larger location in the heart of Dubai’s
finance district, at the impressive Ritz
Carlton, DIFC. This move has allowed
the event to expand from a must attend
conference to include a dedicated
exhibition which will host more than
80 international solution providers
across retail banking, payments and
financial technologies. More than
1,000 professionals can see, hear and
networking with some of the most
influential leaders within the industry.
Keeping the audience engaged, the
new and improved event will include:
-A packed 2 day conference where
industry gurus will present best practice
strategies and the latest case studies
across the key topics affecting the
industry.
-A free 2 day seminar programme
where attendees can hear about the
latest solutions to help to improve their
business.
-A free online networking tool where
likeminded professionals can network
before the event and arrange to meet
during the event.
Don’t miss this celebratory event.
Visit www.retailbanking-expo.com for
more information and to register.
companies to fund a percentage of the
market value of securities traded, and
secure as collateral for the same securities
or any other collateral as required by the
SCA’s license. DFM is currently processing
similar applications from other brokerage
firms in collaboration with the Securities
and Commodities Authority (SCA).
www.wealth-monitor.com | April 2015
OPENING BELL
Dubai Airports Projections Revised to 126m Passengers By 2020
Growth is pushing the Dubai Airports
— operator of Dubai International and
Al Maktoum International in Dubai
World Central — to expand. “Our revised
projections for 2020 now exceed 126
million passengers. By 2030, we expect to
have around 200 million passengers traffic,”
Paul Griffiths, Chief Executive Officer
of Dubai Airports, said at the Future of
Border International Conference in Dubai,
according to WAM.
Dubai International is currently
the world’s number one airport for
international passengers and the sixth
busiest. Al Maktoum International Airport
in DWC , which presently has five to seven
million passengers capacity, saw 845,046
passengers passing through its gates in its
first full year of operations in 2014.
DWC will have a passenger capacity of
220 million on completion of its second
phase. The first phase of $32 billion dollar
expansion of DWC, approved by His
Highness Sheikh Mohammed bin Rashid
Al Maktoum, Vice President and Prime
Minister of UAE and Ruler of Dubai last year,
will enable the facility to accommodate
120 million passengers on completion over
the next six to eight years.
Situated on a 140 sq. km site to the
south of Dubai, Al Maktoum International
will be 10 times larger than the site of
Dubai International, making it the world’s
largest airport and the world’s largest
intercontinental hub. The $7.8 billion
investment will lead to ultimate capacity
of 100 million passengers at the Dubai
International. Last year, it recorded 70.4
rely on aviation activities for the livelihood
which works out to 27% of the total
workforce in Dubai. “The vision for aviation
remains single minded and utterly focused
million passengers, an increase of 6.1 per
cent and this year expected to handle 79
million passengers.
In 2013, aviation contributed $26.7
billion to the economy of Dubai or 27% of
the emirate’s GDP. About 416500 people
on building that contribution at a faster
rate than any other activity in Dubai,” he
said. By 2030, the aviation’s contribution to
the Dubai economy will have increased to
$88 billion, more than three times the 2013
figure.
Philip Lange / Shutterstock.com
VAT Could Be a Reality if Oil Woes Continue
If the oil slump continues beyond the
near term, most oil exporters in the
GCC are expected
to move more
seriously towards a
fiscal consolidation
stance to avoid a
significant rundown
of foreign assets,
Washington-based
The Institute of
International
Finance (IIF) has
said.
Low-priority projects could be
postponed or phased over time without
impeding longer-term growth prospects
April 2015 | www.wealth-monitor.com
or diversification efforts.
“The tax base could be broadened,
including through
the introduction of
a Value Added Tax
(VAT) that would
provide additional
sources of nonoil
revenue and thus
reduce the burden
of
adjustment
needed on the
expenditure side,”
it said in a report ‘MENA: Lower Oil Prices
Present Challenges and Opportunities’.
More importantly, the rapid pace of
growth in domestic consumption of
petroleum products could be reduced.
This could be achieved by intensifying
ongoing efforts to improve efficiency and
by gradually raising the prices of domestic
petroleum products, the report said.
Banking systems in the GCC, with
relatively limited reliance on external
funding and comfortable liquidity, should
be reasonably resilient to low oil prices
in the next couple of years. The expected
modest increase in interest rates in the
U.S. during the second half of this year
and further increases in 2016 may tighten
financial conditions in the GCC countries
because of their exchange rate peg, and
eventually lead to some deceleration in
the growth of credit to the private sector.
9
FACE VALUE | FATHI BEN GRIRA
‘Fed Rate Hike Won’t Impac t
Investment Inflows Much’
Fathi Ben Grira, CEO, MENACORP, Dubai, tells Wealth Monitor that
even if the US Federal Reser ve decides to go for a rate hike, it won’t
have a big impact on regional investments
How would you describe the journey so far of
MENACORP as one of the largest financial services
companies in the region?
MENACORP’s performance so far has been excellent.
We’ve made our shareholders and more of our clients
happier. We were ranked the best brokerage firm for
the last two consecutive years. This shows that we’re a
consistent performer and we feel privileged that we’ve
managed to deliver the same quality of service all the
time. I believe this is the best way to remain at the top.
10
MENACORP has been in multiple business
verticals ranging from investment banking, asset
management, and brokerage. What are the other
business areas of growth you are seeing going
forward? What are your plans?
For us the number one priority is to add new
markets to our brokerage business. Our clients have
increasingly reposed trust and confidence and we’ve
been successful in executing trades in the best interest
of our clients. At the same time, our clients are keen
to explore profitable target markets in the region or
beyond for investment opportunities. And this is what
our strategy is focusing on. More specifically, we’re
going to focus closely during 2015-16 on the Dubai
Gold and Commodities Exchange. This is the market
in which we believe strongly, as it is extremely popular
with investors from the sub-continent and we want to
www.wealth-monitor.com | April 2015
Fathi Ben Grira, CEO, MENACORP, Dubai
FACE VALUE | FATHI BEN GRIRA
be able to serve our clients better in this
market.
Talking about the global market
conditions, the historically low interest
rates in the US have been driving global
investors in recent years to search for
yield in fast growing frontier/EMs,
including the UAE. The US Fed however
is expected to raise rates soon. Do you
believe the timing of a Fed rate hike is
good for the region when oil prices are
low?
We have to see if the Fed really goes for a
rate hike so soon. We’ve been expecting
it for quite some time, but the Fed has
maintained the status quo. The US
economy still needs a low interest rate
regime because it is fuelling their economy.
I don’t really expect a major change in the
whole Fed policy so soon.
However, even if the Fed decides to
go for a rate hike, I don’t think it would
impact much the investment flow in the
GCC region, as the investment inflow in
this region is more connected to the local
considerations than global. Nonetheless,
the impact of global factors are being felt
a little bit, especially in the case of Dubai
which is a tourist hub. For instance, the
Russian rouble slump against the dollar
has negatively impacted Russian tourist
inflow and Russian investment in Dubai
real estate since they now have to shell
out more roubles for the same amount of
dirham.
So is a stronger dollar not always good
for the UAE economy?
Aside from oil, the UAE and the region is
largely an import-based economy. So a
strengthening dollar has a positive impact
in terms of lower cost of living because
anything you buy in supermarkets that’s
coming from non-dollar denominated
countries costs less. At the same time, a
strong dollar makes this country more
expensive for overseas investors, as it
makes holidays in Dubai or hotel room
rates and realty investments in the region
more expensive for a German, Swiss or
French traveler or investor.
The outlook of crude oil looks bearish,
at least in the short term. How do you
assess the impact of weaker oil price
playing out in the UAE and the wider
region?
Initially, the impact was quite severe on
April 2015 | www.wealth-monitor.com
the regional financial markets, and worried
investors rushed to take their money off
the table.
But now after this knee-jerk reaction, the
dust is settling down and investors have
now become used to the conditions. The
great thing is that local governments like
the UAE have reiterated their commitments
to not curtail their infrastructure spending.
More importantly, the low oil price
poses an opportunity for the region’s
governments with huge fiscal reserves to
be more efficient.
The rise of the dollar against major
currencies has also brought down
the valuations of European equities,
because of the weaker Euro. Do you
believe many regional investors are now
finding European stocks more attractive
and are putting their money there than
keeping it in the region?
We recommend our clients to invest in
European markets especially in stocks
of companies that are more exportoriented and which sell their products
worldwide. This is largely because a weaker
euro benefits Europe’s export-oriented
companies, as it boosts their sales earnings
and makes them more competitive. We
therefore believe these companies are
good picks.
On the opposite side, in the US markets
we believe focusing on blue chips which
are leaders in the home market, as the
local US economy is gathering pace.
Nevertheless, despite European stocks
looking cheaper, we can’t say the money
will shift from here to Europe because
regional investors still like to invest in their
backyard, though it might be tempting for
sophisticated investors such as Sovereign
Funds to look at Europe.
The Q4 corporate earnings in the UAE
are a bit down from Q3. What according
to you explains this and what’s the
outlook for the rest of the year?
I don’t believe it’s something dramatic.
Now we’ve new catalysts coming for the
economy with the Expo 2020 in Dubai and
the 2022 FIFA World Cup in Qatar. I’m sure
after the Ramadan, you’ll see all the first
tenders issued for big projects, which will
need performance bonds and guarantees
from banks. This is going to have a
multiplier effect as it will benefit not only
the banks, but contracting companies, fitout companies and everyone else.
Saudi Arabia is about to open its equity
markets, the largest in the Middle East,
to foreign investors. What impact do you
believe it could have on other markets in
the region? Will we see a flight of capital
from UAE to Saudi markets?
The positive impact of it would be felt
across the region, since at the end of the
day all GCC stock markets are one big
market. Some fear the money will shift
from here to Saudi Arabia. To some extent,
it may be the case, but when international
investors would come to Saudi markets, it’ll
benefit the neighborhood markets as well.
Going forward, how do you assess the
overall investor sentiment in the UAE?
We are in a position of wait-and-see. The
first half of 2013 was amazing for UAE’s
stock markets but after that many investors
got their fingers burned largely because
of oil price slump and other issues. Now
these investors are expecting new catalysts
that I just talked about. Overall I believe
this market is maturing and investors are
learning that you can’t win all the time and
you have to accept your loss, wait for some
more time and then take wiser decisions.
There is growth happening in the UAE
and the region. Although there’s a little
bit of fear because of geo-political factors,
but at the end of the day the region is full
of opportunities with a young dynamic
population, who have deep faith in the
future of the UAE and the region.
Any particular sectors you are most
bullish on in the region?
I believe banking sector in the mid-term has
lot of potential. The population is growing
fast and new infrastructure projects are
coming up that need bank financing. The
banking sector though is facing some
challenges, especially related to the
deposits made by the governments which
could come down because of the cheaper
oil price making it a bit difficult for banks
to lend. However, for smart investors this
could be a good investment opportunity
if he chooses wisely the timing of when to
enter and exit banking stocks.
Are you bearish on any sector?
The real estate sector could face headwinds
if the Russian rouble weakening lingers.
Nevertheless, if the oil price goes up or
new catalysts related to Expo 2020 projects
come on stream, we can see investors
getting excited back again.
11
11
Point
BULLS VS BEARS | Crude Shock & Stock Prices
Decoupling
Have the crude oil prices and the GCC stock markets really decoupled, or at least
are showing any signs of decoupling? Does a drop in crude oil price threaten hard
times for Gulf economies and the markets? Three experts debate how deeper is the
correlation between the crude oil prices and GCC’s stock markets
C
Bulls
vs
Bears
12
rude oil is continuing its
bearish run. On March 16 this
year, it touched its lowest
level since 2009 as West Texas
Intermediate crude dropped to
$44.39 a barrel. Last year, Crude
oil price dropped by almost 55%,
sending shock waves across the
global stock markets including the
UAE and GCC region. In the UAE, the
Dubai Financial Market (DFM) which
was the best performing market in
the world in 2014 slipped to being
one of the worst in just over a month
last year.
On Feb 10 this year, ratings
agency S&P revised its outlook
on Saudi Arabia to negative from
stable following sharp decline
in oil prices, while it lowered its
sovereign credit ratings on Bahrain
and Oman. Economic diversification
has been one of the key elements
in the GCC. However, some believe
diversification efforts have met
limited success and oil price
continues to be the key element for
the Gulf economies and the regional
stock markets.
There’s another side to this
argument that the crude oil price
volatility is more a psychological
than a fundamental determinant for
the region. The Gulf economies’ huge
fiscal reserves along with growth in
non-oil sectors such as tourism, trade
and the real estate, will continue to
fuel the economies and remain the
major driver of growth than alone
the crude oil.
Wealth Monitor invited experts
to discuss the implications of low
crude oil prices on the performance
of GCC stock markets. We asked a
few questions from these experts,
such as how do you see the regional
economies’ outlook if oil price
continues to decline this year; do
they agree diversification efforts
have met limited success and
oil price continues to be the key
element for the GCC economies
and stock markets; do they believe
the magnitude of oil price shock
on the GCC and the UAE’s stock
markets is gradually waning; do they
believe oil price volatility is more a
psychological than a fundamental
determinant for regional economies,
as the Gulf economies’ huge fiscal
reserves will continue to fuel their
economies and remain the major
driver of growth than the oil price;
are they bearish or bullish for the
regional markets in the near term
and do they expect UAE’s and GCC’s
markets to consolidate in the short
term amid mixed global cues?
And here’s what they had to say….
www.wealth-monitor.com | April 2015
BULLS VS BEARS | Crude Shock & Stock Prices
MR Raghu, Senior Vice President-Research, Kuwait Financial Centre
Reserves As Cushion
The Brent crude oil price has rebounded
in Feb, and has reached above $60 per
barrel. Some of the GCC countries have
already released their budgets for this
year, and there doesn’t seem to be any
drop in government expenditure. In fact,
Oman, which doesn’t enjoy the cushion
of oil surplus reserves unlike Saudi, UAE
and Kuwait, has increased government
expenditure, and is preparing to face a
deficit situation. Saudi and Kuwait too have
released budgets with larger deficits, with
budgeted price assumptions pegged at
$55-63 for the former, and $45 for the latter.
Countries like Saudi Arabia and Kuwait have
built up substantial reserves during the
oil boom which cushions them from any
sudden impact on spending. If oil prices
go below $40 again, and remains there
and thereabouts for a sustained period of
time, then the regional economies may be
adversely affected.
Changing Correlation
In the last few years, the correlation
between the oil price and GCC markets
has moved towards a new dimension. GCC
stock markets react negatively to a fall in oil
prices but do not have a similar trend with
an upward move in oil prices. Prior to 2008,
the index values approximately followed
the movement in oil prices, while after
2008, the relationship changed slightly.
The gradual increase in oil price seen from
early 2009 till Apr 2011, had little or nil
effect on the index values of oil exporting
countries. This may be due to the regional
governments’ efforts to diversify away from
oil. Recent fall in oil price affected the GCC
indices after a lag, as the markets were
wary of medium to long term effect of
lower oil prices in government spending,
and also because of OPEC’s decision to not
cut the daily output target. So we believe
the magnitude of oil price shock on the
GCC markets is gradually decreasing.
UAE More Successful
While the governments have shown
the intent to diversify their respective
economies, the execution of the plans has
varied across the region. UAE has been
relatively more successful, while countries
like Kuwait have not. But despite the efforts
taken, oil revenues still contribute majorly
to the economies, and more efforts are
needed to improve non-hydrocarbon
economy in the region. For Saudi Arabia
and Kuwait the contribution of oil
revenues is still at 90% and 80% of total
revenues respectively which shows that
the diversification programs have not had
the desired effect.
GCC stock markets
react negatively to a fall
in oil prices but do not
have a similar trend with
an upward move in oil
prices
April 2015 | www.wealth-monitor.com
A Fundamental Determinant
The fiscal reserves accumulated so far are by
no means inexhaustible, and investors are
aware of the fact that oil price determines
the longevity of the accumulated reserves.
If in case low oil prices are sustained over
a period of time,
they will have an
adverse impact
on the regional
economies, and
will also eat up
the reserves at
the same time.
So
oil
price
volatility remains
a fundamental determinant of the
regional economies, until the efforts of
diversification bear fruit. According to the
IMF, the fiscal break-even price for Kuwait
is the lowest in the region at $54 while for
countries like UAE and Saudi Arabia, it is
higher at $80 and $98 respectively.
UAE’ Outlook Positive
While oil prices have plunged and
uncertainty prevails regarding its outlook,
we believe GCC governments have
accumulated significant reserves, offshore
assets and command robust surpluses that
could support continued infrastructure
and social spending. With GCC reserves
totalling over USD 2.8 Trillion, the key
economies command an expenditure
coverage ratio of over 3x, based on 2014
estimated expenditure figures. This should
provide sufficient comfort and cushion to
future government expenditure programs,
and allay investor fears about regional
prospects, which are predominantly fuelled
by government expenditure programs.
Our 2015 outlook for UAE remains positive
on the back of robust reserves, buoyant
economy, healthy earnings growth and
surging market liquidity while we are
neutral on other economies.
13
BULLS VS BEARS | Crude Shock & Stock Prices
Rajiv Kumar, Dy CEO, Phillip Futures DMCC, Dubai
Budgets Highly Reliant On Oil
Despite
progress
on
economic
diversification in the GCC over the
last decade, regional budgets remain
highly reliant on oil revenues and are
thus vulnerable to sustained changes
in oil prices. Lower revenues may force
governments to curtail their efforts to
tackle energy subsidy reforms as a result
impacting petrochemicals. Saudi Arabia
derives substantial revenues from the
hydrocarbons sector. Saudi Arabia’s
economy is undiversified and vulnerable
to a steep and sustained decline in the oil
price. However, Kingdom’s decision to give
bonuses to public sector workers recently
is a clear indication that the kingdom will
maintain currently budgeted public sector
spending. With a forex reserve of almost
$780 billion and government debt being 3
% of the GDP, indications are clear that in
the near term falling crude prices may not
have a drastic effect.
However, Qatar and UAE will be least
affected by sharp fall in oil prices due to
large scale diversification in non-oil sectors.
In fact, the current situation may also
turn out to be a trigger point for the GCC
economies to reduce their dependency on
Oil and diversify into other areas.
14
Limited Exceptions
The latest IMF regional economic outlook
points out that despite progress on
economic diversification in the GCC over
the last decade, regional budgets remain
highly reliant on oil revenues and are
thus vulnerable to sustained changes in
oil prices. Limited exception to these are
UAE and Qatar where diversification has
brought down the breakeven price of oil to
large extent. In fact, Dubai is an exception
in that it relies more heavily on trade,
tourism, real estate and construction, and
transportation and is enjoying favourable
economic conditions. Qatar also is moving
slowly in this direction by way of huge
infrastructure investments.
to enter
markets.
these
Correlation between oil
prices and performance
of local GCC markets will
largely be dependent
on the ability of the GCC
countries to diversify
their economies’ revenue
Fiscal Spending
A Key Driver
No doubt, poor
sentiment related
to oil prices could
slow
growth
next year however, big Gulf economies on
account of their large accumulated fiscal
and external reserves, can ride out an era of
lower oil prices without facing debt crises or
steep reductions in their economic growth.
Fiscal spending, a key driver of economic
growth in the region, will probably remain
unchanged. Secondly, dependency of
some of the GCC economies like the UAE
and Qatar on oil revenue has come down
on account of diversification.
Gulf economies are also facing intense
competition from non OPEC producers
to maintain their market share in the key
emerging markets, where they export.
As a consequence, they are offering deep
discounts to these key importers which will
prevent the oil price to rebound in the near
future.
The impact on overall spending plans by
respective economies are not going to be
significant unless the oil prices remains low
for a prolonged period as high oil prices
over the past four years have allowed the
GCC to build up massive financial reserves.
According to IMF report, the GCC states
held some $881 billion in official foreign
reserves in 2013. In fact, with the emerging
market status accorded to UAE and Qatar,
low prices in the DFM and ADX can actually
trigger a lot of funds inflow from Global
Institutions and Funds as the valuation
at this level may look attractive to them
Markets Will Remain Under Pressure
Down 13.3 percent this year, Kuwait’s index
is the worst performer in the Gulf whereas
Qatar so far has been the best performer.
UAE and Qatar markets may attract decent
foreign funds into the markets because
of the emerging market status accorded
to them. As a diversification step, Saudi
Arabia is also opening up its stock market
to international investors in the first half of
2015, giving foreigners greater access to
the Arab world’s biggest bourse.
Overall, markets will remain under
pressure however, some consolidation may
be seen in near term. Further it will recover
faster if oil price start rising.
Prolonged Drop Will Hurt
Correlation between crude oil prices and
performance of local GCC markets will
largely be dependent on the ability of
the local GCC countries to diversify their
economies revenue that is so far largely
dependent on crude oil revenues. The nonoil sector particularly construction and
retail trade will continue to drive economic
activity especially in UAE and Qatar.
www.wealth-monitor.com | April 2015
BULLS VS BEARS | Crude Shock & Stock Prices
Muhammad Shabbir, Head of Equity Funds And Portfolios,
Rasmala Investment Bank, Dubai
Limited Success in Diversification
Despite GCC governments efforts regarding
diversification of their economies most of
the economies are still too much reliant on
oil. The dependence is visible as share of
non-oil receipts to total receipts for the GCC
as a whole have only worsened between
2003 and 2013, from just over 23% to less
than 20%. Therefore we agree with the
notion that diversification have had limited
success. However, for a fuller picture one
needs to look at the trend in this ratio over
the last 10-15 years.
The magnitude of
the shock will depend
on the actions of
governments regarding
spending rather than
just on the oil price
Spending Also Matters
The correlation between oil and the regional
stock markets spiked to 0.9 in December
2014 compared to around 0.5 during the
period between Jan 2012 to June 2014.
Since then it has come down a bit but is still
at elevated level. We believe going forward
the correlation will remain significant but
the magnitude of the shock will depend on
the actions of
governments
regarding
spending rather
than just on the
oil price.
Fundamentals
To Rule In Long
Term
We partially agree with the statement
(that oil price volatility is more a
psychological than a fundamental
determinant for regional economies, as
the Gulf economies’ huge fiscal reserves
will continue to fuel their economies and
remain the major driver of growth than
the oil price). As was mentioned in the
previous point the real determinant will
be how those reserves will be spent during
the period when oil prices are either low
or volatility is high. While influence of the
psychological factor will be high in the
short term, the fundamental factors will
rule over the longer term.
Consolidation in Near Term
We expect some consolidation in the
near term as earnings will be pressured
for names which are more linked to oil
prices and investors wait for more cues
regarding spending by both corporates
and governments.
Wrapping Up
April 2015 | www.wealth-monitor.com
While there is a strong correlation between the GCC countries and oil price, the extent of
correlation is not homogeneous for all countries in the region. Whilst for markets such as Qatar
and the UAE whose dependency on oil has come down due to their economies’ diversification
in non-hydrocarbon sectors, the impact of dip in oil price is going to remain varied there from
that in other economies of the region. Nevertheless, if the world is going to experience much
more than a temporary dip in oil price, it could have a knock-on effect on the overall investor
sentiment in the region.
15
PORTFOLIO | E-commerce
IT’S
CLICKING
More and more buyers in the UAE and the region are shopping online. But
does the rise of e-tailers pose a challenge to brick-and-mortar shopping
centres and mega malls in the UAE and the region, or do they supplement
each other? Sunil Kumar Singh explores in this cover story
16
www.wealth-monitor.com | April 2015
PORTFOLIO | E-commerce
L
et’s do a little bit of number-crunching
first. One company with just 2 years
in operation and a whopping 500%
jump in sales year-on-year. And it is for real!
The UAE-based online shopping platform,
awok.com, has done just that.
Awok.com is just a case in point. There
are a host of online retailers in the UAE and
the region that are raking in the moolah
through selling products online.
Online retail in the region has taken a
giant leap and is still growing. Log on to
any of the sites, such as souq.com, namshi.
com, jadopado.com, and you’ll invariably
be lost in a world of almost infinite choice
or get mystified by the multiplicity of
branded products that are available at a
bargain price.
Online shopping is fast catching the
fancy of shoppers in the UAE. According
to Online Shopping Behaviour Study 2014
conducted by MasterCard, over 50% of
those surveyed indicated they access the
Internet for online shopping of which more
than 80% said they were highly satisfied
with their online shopping experience.
Jockeying For Position?
So as more and more shoppers log on to
shop, is it a warning bell for the malls in
the UAE? Will they struggle to maintain
customer loyalty? Is online retail out to
trump traditional shopping malls? Far from
it.
No doubt, the UAE, and especially
Dubai, has established itself as a shopping
paradise, thanks to behemothic malls
showcasing high-street brands and
attracting shoppers from around the
world. But when it comes to comparing
online and offline retail in the region, many
tend to pit conventional retail against
online retail.
There is no competition between the
two, shrug off experts!
“The growth of online retail and
commerce quadrupled in the last couple
of years due to the accelerating growth
and continuing influence of the Internet
internationally, the high rate adoption
regionally and the proliferation of online
businesses and services. However, the
online retail sector is still behind compared
April 2015 | www.wealth-monitor.com
f
to the global benchmarks,” argues Adey
Salamin, Founder & CEO, iMENA Group,
Dubai.
Despite rapid strides, sales through
online channels in the UAE and the wider
Middle East & Africa (MEA) region still
comprise a minuscule of the entire retail
sales pie.
According to eMarketer, in 2015 while
the total ecommerce retail sales (excluding
travel and event tickets) is expected to
touch $25.24 billion in the MEA region,
it’ll be a paltry 2.9% of the total retail sales.
Next year, the figure is expected to touch
$31.48 billion and 3.3% respectively, while
in 2017 this is not expected to improve
much with $38.51 billion and 3.7% share
respectively ( See Catching the...)
More Than Shopping Venues
The GCC and particularly Dubai has been a
global shopping paradise and will remain
so despite coming up of multiple online
retailers, believe experts.
One of the greatest reasons behind
it is the popularity of malls as the hub of
17
17
PORTFOLIO | E-commerce
the most required sizes in store, will
continue to attract shoppers to malls and
departmental stores in the region, he adds.
Market Size in 2014 - US$ bn
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
Internet Retailing
The GCC and particularly
Dubai has been a global
shopping paradise and
will remain so despite
coming up of multiple
online retailers, believe
experts
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
Asia-Pacific
Western Europe
Latin America
North America
Source: Euromonitor International, “Top 10 Global Consumer Trends for 2015”
entertainment, leisure, dining, recreation,
and, of course, shopping, all under one roof.
The colossal malls in Dubai and the region
are more of a destination for family and
entertainment than just plain shopping,
giving them an edge over online retailers.
“In the Gulf, mall shopping is very much
a social and recreational event. Younger
consumers when it comes to fashion like
to shop with a small group of their peers
perhaps having searched online and shared
the results via social media prior to making
an actual purchase in a conventional
shopping centre,” says Simon Thomson,
Founder & Principal, Retail International
UK, a retail consultancy firm.
Ambience, attractive offer, good choice
of merchandise and sufficient stock of
Store-based Retaling
Coming Together
For many offline retailers in the region,
the online channel is increasingly
becoming a supplementary tool to
support their business, as opposed to
a being a competitor. There’s no more
watertight door keeping online and offline
retailers apart, thanks to the adoption of
omnichannel strategy.
Omnichannel approach gives buyers
the freedom to buy any merchandise, for
example a shirt, either by walking into
a store and purchasing the product or
surfing the Internet through a mobile
phone and ordering online. The customer
can either buy the shirt online or try it out
Market Size in 2014 - US$ bn
David Macadam, CEO, Middle East
Council of Shopping Centres
Sizing Up the Market
are scaling up their online presence too.
Jumbo Group in the UAE, for instance, sells
its products through its online store too.
Similar is the case with other retailers such
as Sharaf DG, Giordano, among others.
“Offline retail isn’t going anywhere, and
online is here to stay. Contrary to what
either sector would have you believe,
in any of that particular brand’s stores, and
buy it there. Either through purchasing
online or offline the customer can return
the shirt online if it’s not fitting well or
return the shirt to the traditional shop.
Additionally, brick-and-mortar retailers
Catching the Retail Pulse: How Middle East & Africa Stack Up
Retail Ecommerce Sales Growth (% change)
Asia-Pacific
2013
39.7
38.0
s growth
Sale
29.7
27.1
16.6
16.0
Central & Eastern Europe
2014
29.9
26.3
22.6
16.1
15.8
15.8
Latin America
2015
18
2016
2013
2014
2015
2016
2017
24.5
2017
28.2
20.5
20.5
22.7
24.7
16.9
26.3
15.4
22.3
16.4
14.4 13.6
13.1 10.8
15.9
12.3 9.7
North America
Middle East & Africa
Western Europe
www.wealth-monitor.com | April 2015
PORTFOLIO | E-commerce
Omar Kassim, Founder, JadoPado
we’re rapidly approaching a time of omnichannel commerce, where retail serves
customers across multiple channels,
regardless of whether they’re in-store,
online, on mobile or otherwise,” says Omar
Kassim, Founder, JadoPado, an online
marketplace to buy and sell products.
Fairer Deal?
The cost of goods sold online in the
region could be lower due to the lower
operational and distribution cost involved,
compared to physical malls or stores.
However, the difference in prices in many
cases isn’t significant.
This is because in the UAE and the region
there is no tax for buying products online
or in traditional retail shops. In developed
markets such as the USA, online shoppers
do not pay tax at the same level as
traditional retail shops.
“Generally in this region I don’t see
any substantial differences in the price
of merchandise bought either online or
offline. The advantage of online shopping
is wider than just the price differential, i.e.
a customer is able to source and shop a
variety of products from anywhere in the
world even though it might not be freely
available in the conventional store located
in that country or region,” argues David
Macadam, CEO, Middle East Council of
Shopping Centres, Dubai.
This means buying online isn’t the
cheapest deal always, at least in this
region. If you’re a bargain hunter, you can
get great deals on street markets in Dubai
as opposed to online. You can buy, for
example, an Apple iPhone 6 Plus - 16GB,
4G LTE, Gold at just AED 2700, from an
Retail Ecommerce % of Total Retail Sales
Adey Salamin, Founder & CEO,
iMENA Group, Dubai
electronics shop in Bur Dubai, if you aren’t
terrified of haggling, even though it’s
selling a tad higher at AED 2749 on a few
online shopping sites in the UAE (price as
on March 12).
Price apart, however, what distinctly
separates the online buying behaviour
of this region vis-à-vis rest of the world
is the majority of younger generation
shoppers who’re not so price conscious
(unlike many markets such as India where
value chase is what that’s bringing more
and more shoppers online, causing many
conventional retailers to lose a chunk of
their customers).
Value chase therefore is not the biggest
determinant or the pull factor driving
buyers to log on and shop, as is the wider
choice and convenience that it offers. This
is what’s giving ample space to both online
Retail Ecommerce Sales Worldwide, by Region, 2013-2017 (billions)
2017
10.5
8.3
8.5
3.2
3.7
3.2
2017
1148.15
2016
9.4
7.6
7.8
3
3.3
2.9
2016
953.21
2015
8.2
7
7.1
2.7
2.9
2.6
765.38
2014
2015
7
6.4
6.3
2.5
2.4
2.3
2013
5.9
5.7
5.5
2.3
2.1
2.1
480.16
38.51
75.36
355.59
427.48
31.48
65.04
377.82
2014
597.25
2013
459.86
20
282.7
48.41
285.26
244.11
16.32
29.54
55.12
64.43
25.25
321.04
56.38
330.29
41.69
April 2015 | www.wealth-monitor.com
390.17
Source: eMarketer, Dec 2014
Hosam Arab, Co-founder and
Managing Director, Namshi.com
37.29
45.75
19
PORTFOLIO | E-commerce
What Lies Ahead
One thing is sure that online shopping in
the region isn’t a fad among youngsters any
more. However, despite rapid strides made
by online retail in the region riding on the
growth of Internet users, there’s a little
probability of it taking on the conventional
shopping behemoths head on.
Both segments are comfortable playing
in their own turf and are not poles apart,
as is the case in many markets around
the world. Above all, the adoption of
omnichannel strategy is making the
difference between online and offline retail
indistinct.
Secondly, the online retail biggies such
as amazon, ebay are yet to see the region
as an opportunity. Another factor limiting
the growth of online retail is the preference
for cash-on-delivery payment mode than
paying through credit cards.
Shoppers mostly buy cash-on-delivery
through online portals, which is less
efficient for the retailers and a limitation
for the growth of online retail in the region.
When more and more online shoppers pay
through their credit cards, these online
portals will enjoy a greater reach, maintain
experts.
“The challenge however in the UAE
and the region is that many buyers prefer
to pay through cash-on-delivery mode
as generally they don’t trust paying
through their credit cards online. That’s
a key difference between developed
online markets like the west (where most
shoppers buy online through their credit
cards) and this region where cash-ondelivery is the major payment mode,” says
Macadam.
There are some issues with logistics,
Hot Online Deals In GCC
20
The GCC region is increasingly becoming
a high growth market for e-commerce
deals. This year two major deals hogged
the limelight. In February this year, German
e-commerce firm Rocket Internet agreed to
acquire 100% of the shares in Kuwait-based
online food takeaway firm Talabat, for approximately EUR 150 million. In another
deal, global online food delivery company
foodpanda in February announced that it
acquired food delivery business 24h.ae in
the Middle East. In another development,
last year, Souq.com, the largest ecommerce
platform in the MENA region, secured US$75
million (AED 275.5m) in an additional round
of funding from existing investor Naspers
Limited. This round of funding brought the
total amount raised by Souq.com to US$150
million (AED 551m) – the largest amount
raised by any Internet-based business in the
region.
Top Online Shopping Trends in GCC
and conventional retailers to expand here,
without encroaching upon each other’s
turf.
“For online businesses, wider choice
and convenience are major factors that
encourage consumers to shop online.
Choice is definitely a motivator; while
we do not believe that value is equally
as important. That is not to say that as a
retailer, one should not focus on offering
value, but the younger generation is
largely driven by choice and convenience,
much more so than they are by value,” says
Hosam Arab, MD and Co-Founder, Namshi,
an online fashion retailer, where younger
consumers make up a large portion of its
customer base with 70% of all its customers
between the ages of 18 and 34.
warehousing and funding too.
“The only challenge for us in terms
of expansion and logistics is that we
are required to stock our products and
maintain warehouses. But these problems
are comparably nothing than what
traditional businesses face. In terms of IT
and bandwidth we don’t face any problem,”
says Ulugbek Yuldashev, Founder and CEO,
awok.com.
Adds Adey Salamin of iMENA Group,
“We believe that the high cost and large
startup capital required to set up and run
an e-retail business — given the need for
offline transportation and warehousing
— is an obstacle to the success of this
business model in the region. This is due to
the scarcity of financial resources (in terms
of funding) and the fragmented nature
of the region’s markets, not to mention
challenges with online payments due to
the conventionality and traditionalism of
banking institutions in MENA.”
Time is a major factor in this fast growing
market. Businesses that enter too late in
the game will be pushed out of the market
in the long term, he cautions.
UAE
Ecommerce sites
Websites offering coupons and
deals, home appliances or
electronic products and apps
stores.
Sites Seeing
Increase In
Visitors:
Entertainment-specific portals
including movie theatres, sites
for music downloads, digital
content for entertainment,
books, CDs and DVDs, and
paid-for local and international
news websites.
Sites Seeing
Decrease In
Visitors:
Top 3 Items Bought
Through Mobile
Phones:
Airline tickets
Mobile apps
Coupons or deals
www.wealth-monitor.com | April 2015
PORTFOLIO | E-commerce
What Buyers in MENA Shop Most Online
Insurance (e.g., car, home, life)
Car spare parts and
accessories
5%
Media products
(e.g., books, DVDs,
CDs)
Borrowing services
(e.g., loans and
mortgages)
4%
3%
9%
Digital
technology (e.g.,
TV, cameras,
Mp3s)
Airline tickets
22%
20%
12%
19%
16%
Clothing,
accessories,
and cosmetics
Hotel bookings
17%
17%
Media
downloads
(e.g., e-books,
movies, Mp3s)
Computers,
laptops, and
tablets
Oman
Qatar
Saudi Arabia
Souq, Cobone and Amazon
Souq, Amazon, eBay, Saudi
Airlines
Websites offering coupons and
deals, beauty-care brands and
apps stores.
Airline portals, websites offering
home appliances, electronic
products and app stores.
Sites offering travel, groceries,
music.
Computer software websites,
travel, personal education and
professional development
websites, as well as paid-for local
and international news websites.
Computer software, coupons
and deals, personal care and
medicines.
Home appliances websites,
online gaming, and computer
software sites.
Source: 2014 Online Shopping Behaviour Study by MasterCard
Mobile
subscriptions
and credit
Mobile phones
Source: Booz & Company–Google Arab Digital Generation survey 2012
10%
21
Mobile phones
Music
Airline tickets
April 2015 | www.wealth-monitor.com
Mobile apps
Toys & gifts
Airline tickets
Groceries
Movie tickets
Music
PORTFOLIO | E-commerce
Tipping
Point
M-Commerce in the UAE is gaining momentum
with increasing number of shoppers using
their mobile devices to make purchases online,
writes Manickam Ravindran
G
22
lobally, mobile commerce is
estimated to grow from roughly
$102 billion in 2013 to around $291
billion in 2016, according to a survey report
of PayPal, in association with the market
research company Ipsos covering the e
commerce habits of 17,600 consumers in
22 countries.
As per the survey, in the UAE, mobile
shopping makes up for 24% of overall
online spending closely followed by China
at 21% and Turkey, at 19% respectively.
In terms of smartphone shopping
density, more than 68% of Chinese online
consumers said they have used their
mobile devices to make purchases on a
smartphone in 2014. The number is only
slightly lower for UAE shoppers, at 57%, and
53% for Turkish consumers. In the US, 31%
of consumers report that they have used
their smartphones to shop in the past 12
months.
Overall, a third of online shoppers
surveyed by PayPal said they have used
their smartphone for making an online
purchase in the past 12 months. The
increase in mobile shopping is being driven
by smartphone shoppers in the age group
of 18-34 (59% of smartphone shoppers in
that age bracket reported using mobile to
shop online).
Globally, 64% of smartphone users
reported using an app for purchases as
opposed to the 52% who used mobile
browsers. The reasons cited for that are
convenience and speed. Convenience was
cited by 35% of users and speed by 30%.
Instant payment confirmation and having
a reminder in the app to use discounts or
coupons were two other major reasons
cited by those surveyed.
In terms of actual mobile shopping
behaviour, 36% of consumers say they use
mobile to get info on a product, 27% use
mobile to find a business and 25% use
devices to read reviews on particular stores
or products. But 33% of the consumers
surveyed reveal that in the future, they are
interested in using their smartphones for
more mobile-centric tasks.
Three of the top five players in the mobile
commerce space is from Asia (China, Japan
and Indonesia) and they account for $280
billion worth of turnover in 2014, according
to the PayPal survey.
In North America, the US market
generates billions worth of mobile retail
sales, with its share on total online retail
reaching over 15%. In Latin America,
mobile shopping is on the rise, as mobile
penetration grows and retailers introduce
mobile apps with Mexico leading the pack
followed by Brazil, the region’s largest
retail market and Argentina. In Central
Europe, Germany leads in penetration
of smartphone/tablet owners who shop
on mobile at least once a week with
m-Commerce sales accounting for 10% of
the total online retail sales in 2013.
In Western Europe, the UK leads by share
of mobile retail on total B2C e-commerce
sales, with sales from tablets growing
faster than sales from smartphones. In
France, over a quarter of online shoppers
preferred to purchase from mobile in 2014,
while in the Netherlands over 2 million
people already engage in mobile shopping.
In Eastern Europe, mobile shopping is
capturing a growing share of the retail
sales pie. In Asia-Pacific, South Korea sets
the newest trends for global m-commerce,
such as integration of mobile shopping into
messaging platforms.
In Japan, a high double-digit share of
mobile users shops via their devices. The
number of mobile Internet users in China
topped half a billion in 2013, with over
a hundred million of them engaging in
m-commerce.
Both in South Africa and in the UAE the
share of Internet users shopping though
mobile phones shows an uptrend. Mobile
commerce has a high potential in the
Middle East, as smartphone and tablet
penetration is high, and mobile is often the
most common mode of connection to the
Internet in the region.
www.wealth-monitor.com | April 2015
MARKETS C
SMOS
In this section, Manickam Ravindran analyses news and data from the regional and
international financial markets with specific focus on precious metals, base metals, energy,
agri/soft, currencies, Arabian bourses and global view
Energy
P re c i o u s Me t a l s
C u r re n c i e s
Arabian Bourses
Ag r i / S o f t
Precious Metals P.24
Downward Pressure
Base Metals P.26
G l o b a l V i ew
Limited Upside
Energy P.28
B a s e Me t a l s
Oil Off the Boil
Agri/Soft P.30
Prices Expected To Soften
Currencies P.32
Riding Greenback
Arabian Bourses P.34
Waiting For Catalysts
April 2015 | www.wealth-monitor.com
Global View P.35
Divergent Growth
23
PRECIOUS METALS | Muted Demand
Downward Pressure
Metals weakness to persist in 2015
T
he price behaviour of the precious
metals presents a picture of contrast.
After finding some price support in the
first half of 2014 due to receding geopolitical
risks, fundamental weakness of the precious
metal market contributed to the price
declines in the second half of 2014. Physical
demand for precious metals by traditional
buyers, particularly China and India, was
considerably weak in 2014, until a large drop
in prices induced buying.
Outflows from exchange traded funds
(ETFs) accelerated in the fourth quarter of
2014 at 5 percent (q/q) rate with holdings
down 9 percent (y/y) as investors expect
normalization of the US monetary policy.
Low gold prices have prompted mergers and
acquisitions in South Africa’s gold mining
industry, with companies seeking to reduce
operating costs and insulate investors from
labour strike risks. Precious metal price
weakness will persist in 2015 as institutional
investors consider these commodities as
less ‘safe haven’ holdings. While downward
pressure on precious metal prices is
expected to become more pronounced
when the US Federal Reserve raises interest
rates (expected in mid-2015), the European
Central Bank’s plan to purchase €60 billion of
assets per month through September 2016
may put upward pressure on price.
24
Gold To Retain Its Shine
Gold price is likely to be strongly influenced
by the forthcoming turnaround in US interest
rates this year.
The effects on the gold price of the ECB’s
government bond purchases that is expected
to begin from the first quarter of 2015 are not
easy to quantify. They are likely to strengthen
the euro rate and the ECB’s “money printing”
could also give a boost to demand for gold
as a store of value, especially in Germany
and other stability-oriented Euro zone
countries. This would result in an increase
in the gold price in euros, which would help
to cushion the negative impact of the euro’s
depreciation on the gold price in US dollars.
Physical demand will have to pick up
if the gold price is to climb again in 2015.
tons.
The gold price
might remain
u n d e r
pressure
The gold price might
remain under pressure
initially in the first half
of 2015 on the back of
growing speculation
about increasingly
imminent interest rate
hikes in the US
According to figures from the World Gold
Council, the third quarter of 2014 saw
physical demand decline to its lowest level in
nearly five years, with muted demand from
China. Part of this collapse is caused by the
sharp rise in 2014, where presumably some
purchases were brought forward. Greater
gold demand is envisaged again in China in
2015.
Gold demand also declined noticeably in
India in 2014. The liberalisation of the import
restrictions by the Indian central bank at
the end of November lent further buoyancy
to Indian gold demand. It is expected that
Indian demand in 2015 will exceed 850-900
initially
in the first
half of 2015
on the back of
growing speculation
about
increasingly
www.wealth-monitor.com | April 2015
PRECIOUS METALS | Muted Demand
1175
(Nov 2014)
GOLD
imminent interest rate
hikes in the US. Gold
is likely to bottom
out at the onset
of the cycle
of
rate
h i k e s
in the
second
q u a r t e r.
O n c e
the interest
rate hikes are
underway,
the
pressure on the gold
price is likely to subside.
By the end of 2015, the gold
price should climb to $1,250 per
16.0
(Nov 2014)
SILVER
1208
(Nov 2014)
PLATINUM
1242
(Jan 2015)
April 2015 | www.wealth-monitor.com
Monthly Average Price of
Precious Metals ($/toz)
1199
(Feb 2015)
1201
(Dec 2014)
1251
(Jan 2015)
16.8
(Feb 2015)
17.2
(Jan 2015)
1215
(Dec 2014)
troy ounce, finding support from reviving
demand in China and India as well as
renewed inflows into gold ETFs. Any
deviation by the Fed from the assumed
course of action on the interest front poses
the greatest risk to this forecast.
Silver: Supply Side Stable
Silver’s price in 2015 can be expected
merely to move in harmony with the
gold price despite currently being at its
cheapest level relative to gold. Boosted
in part by its attractive price as compared
with gold, demand for silver coins and bars
should see a marked recovery in 2015.
The industrial demand is yet to show up.
Economic growth in China will continue to
slow next year, which is also likely to put
the brakes on industrial demand for silver.
Silver demand will be dampened further
by the continued reduction of silver in
solar cells. The photographic industry’s
share of industrial demand is likewise
expected to continue declining. Jewellery
demand could profit from the favourable
silver price and the resulting substitution
effects.
The supply side looks relatively stable
despite the sharp fall in price and low price
level. Mining production even reached a
new record high this year. At the present
low price level, the supply of silver scrap
is hardly to increase at all after a sharp
fall in 2014. The primary surplus from
supply and physical demand in 2015 will
probably be smaller and absorbed by ETF
inflows. This should prevent any renewed
underperformance as compared with
gold. Silver price is expected to move
16.3
(Dec 2014)
Source: World Bank
Sources: Commodity Markets Outlook, Jan 2015, World
Bank; Commodities Price Data, Feb 2015, World Bank
1227
(Feb 2015)
around $16 per troy ounce by mid-2015
and $18 per troy ounce by the end of 2015.
Platinum Could Move Up
The markets for platinum are extremely
tight at present. Johnson Matthey, the
world’s biggest platinum refiner, estimates
the global platinum supply deficit this
year at 1.13 million ounces. The figures
represent the highest supply deficits since
the data series began more than 30 years
ago. Supply has been lagging behind
demand on both markets for three years
now.
Johnson Matthey also envisages supply
deficits for platinum in 2015. The South
African mining supply of platinum is
expected to recover noticeably in 2015
because the negative effect of the strike
is no longer relevant. This is likely to be
offset by further rising demand from the
automotive industry and for jewellery.
It will be investment demand that
dictates the level of the market deficit, and
is unlikely to bring about another decline
in overall demand in 2015. Assuming that
investment demand does not collapse,
this indicates that a platinum supply
deficit on at least the same scale as 2014
cannot be ruled out.
The platinum price in the first half of
2015 will not bring any surprise, but by
mid-2015, platinum is likely to be priced at
$1,200 per troy ounce and should recover
markedly in the second half of 2015. The
platinum price will climb to $1,300 per
troy ounce by the end of 2015.
25
BASE METALS | Prices Soften
Limited
Upside
Rising inventories, weak demand,
and increasing global supply weigh
on prices
M
etals prices dropped by 5.7
percent in January 2015 for sixth
consecutive months on concerns
about dwindling demand in China, notably
in sectors like construction and weakening
global manufacturing activities. Base
Metals are benefiting from lower energy
prices, cost deflation, and depreciating
producer-country currencies, which are
sustaining higher-cost production.
20000
17541
Base metals16893
experienced a general fall in
18000
15030
16000
prices and the largest14573
price decline was for
14000
copper, down by 10 percent, on concerns
12000
10000
about rising
inventories,
weak demand, and
Nickel
($/mt)
8000
6000
continued gains in global
supply. Nickel
Nickel
4000
prices fell 7 percent as stocks climbed to
2000
0
record levels due to weak demand and
2012
2013
2014
Feb -2015
continued strength of China’s nickel pig
iron production despite Indonesia’s ore
export ban.
Aluminium prices fell 5 percent, despite
26 falling
stocks, on a continued surplus
2022
2050
Aluminium ($/mt)
within
China
and potential smelter restarts
2000
1950 in the rest of the world. Zinc prices fell by
on expected
1900 3 percent but rebounded
1867
1846
1850
supply tightening from upcoming mine recovery in the US and a positive economic
closures, notably the large Century mine in outlook in Europe will boost the demand
growth. The price spikes in copper are quite
Australia this year.
unlikely in the near term.
Price Spikes in Copper Unlikely
Copper remains a well-supplied market, Nickel May Not Throw Any Surprises
and a lower oil price in combination with LME inventories have shot above 400kt,
weaker producer currencies will lower the and Chinese late rite port stocks are at the
marginal cost support level. The price trend same levels as at the beginning of 2014.
clearly indicates that the price will continue A sizeable proportion of the rise in LME
stocks is however from past surpluses and
its downward slide in the near future.
The copper market remains well the composition of Chinese ore stocks has
supplied for the next two years. Chinese shifted from high grade to medium grade.
copper demand has been strong. The However, the year 2014 went down as
strong Chinese demand, along with a another surplus year and the potential for
9000
8000
7958
7331
Copper ($/mt)
7000
5863
6000
5729
5000
Copper
4000
3000
2000
1000
0
2012
2013
2014
16893
15030
14573
Nickel ($/mt)
Nickel
2012
2013
2014
Feb -2015
www.wealth-monitor.com | April 2015
Aluminium
1750
1700
2013
17541
1818
1800
2012
Feb -2015
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2014
Feb -2015
2200
Zinc ($/mt)
2161
BASE METALS | Prices Soften
Base Metals Price Movements
Monthly Average
Nov 2014
Monthly Average
Dec 2014
Sources: Commodities Outlook 2015, Deutsche Bank; Quarterly Metals Report Jan 2015Sucden Financial; Source for price graphs: IMF Commodity Market Monthly March 10, 2015
Monthly Average
Jan 2015
Monthly Average
Feb 2015
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
17541
Unit $/mt
Unit $/mt
2056
1909
1815
1818
6713
6446
5831
5729
Unit $/mt
15807
15962
14849
14574
Unit $/mt
2253
2176
2113
2098
Source: World Bank
16893
15030
14573
Nickel ($/mt)
deficit in 2015 hinge on falling LME stocks,
acceleration in the decline of ore stocks at
20000the Chinese
Ports and16893
a sharp fall in Chinese
17541
2012
18000
NPI production
15030due to a shortage
14573 of ore.
16000
The nickel price might experience
14000
12000headwinds in the first half of 2015 but may
10000
($/mt)
not throw anyNickel
surprises.
8000
Nickel
of robust global demand
and producer the confirmation announcement was no
discipline has provided the foundations for surprise. The other significant news was
the2013recovery
in aluminium
prices, with the the approval of the first big (in the context
2014
Feb -2015
Copper ($/mt)
7958
degree of global annual surpluses being 9000
8000
7331
of the zinc market)
Greenfield project by a
significantly reduced.
7000
5863Zinc prices have
major western producer.
Supply flow both in China and the 6000
5729
held up well, despite the general correction
world ex-China, assisted by strong demand 5000
Copper
in the broader commodity markets. This
growth has ensured a balanced market in 4000
6000
Nickel
3000
2022
4000Aluminium Could Hover Around $2,500
2050
2014. The
tighter market
Aluminium
($/mt)in 2015 should see 2000
is a reflection of the favourable supply2000
2000
The 3-month aluminium price touched
an upsurge in price, but higher price will 1000
0
demand fundamentals, reinforced by the
1950
2013
Feb -2015
0
a low2012of $1,677/t
at2014
the beginning
of lure metal out
9000of storage and encourage
Copper ($/mt)
steady2012
decline 2013
in exchange
stocks.
Chinese
7958
2014
Feb -2015
1900
1867
March 2014, before peaking at $2,107/t
in restarts,
halting
8000the upside. 7331
1846
demand
indicators
for
zinc
have
been
1850 price
1818
7000
September 2014. The all-in aluminium
5863
strong
1800same
5729 during 2014 and may continue in
including premium peaked at the
Zinc May Be 6000
Under Check
5000 Aluminium
1750
time at a price of $2,538/t. The combination
The zinc market
has been in a deficit for 2015. Copper
4000
1700
three years, since
2012. In each of the past
3000
2022
2012
2013
2014
Feb -2015
2050
Aluminium ($/mt)
three years, 2000
mined zinc supply growth
2161
2200
Zinc ($/mt)
2000
2150
has been below
2%. As a result, prices
1000
2098
2100
1950
0
have slowly begun
to appreciate and may
2050
2012
2013
2014
Feb
-2015
1900
1867
continue appreciating in 2015 also, but
2000
1846
1950
Zinc
1850
1818
1910
1950
not significantly. The supply side in zinc
1900
1800
is responding and this response will keep
1850
Aluminium
1750
zinc prices in check for 2015, with market
1800
1750
in a modest deficit. The closure of the
1700
2012
2013
2014
Feb -2015
2012
2013
2014
Feb -2015
big Century mine
was
well
known
and
2161
2200
Zinc ($/mt)
2150
April 2015 | www.wealth-monitor.com
2098
2100
2050
2000
1950
1900
1950
1910
Zinc
27
Base Metals Price Movement
Monthly Average Monthly Average
ENERGY
| Bearish
Commodity
UnitTrend
Nov 2014
Dec 2014
Monthly Average
Jan 2015
Aluminium
$/mt
2056
1909
1815
copper
$/mt
6713
6446
5831
Nickel
$/mt
15807
15962
14849
Zinc
$/mt
2253
2176
2113
Oil Off The Boil
Monthly Price Movement
Commodity
Unit
Nov 2014
Dec 2014
Jan 2015
Feb 2015
Wheat, US RW
$/mt
258.7
269.6
248.5
Rice
$/mt
418
418
420
420
Sugar
$/kg
0.36
0.34
0.34
0.32
Meat
$/kg
6.07
5.89
5.69
5.71
231.12
Pain of low oil price may persist
Oil Price Movement
78.4
76.7
75.8
62.3
60.5
59.3
48.1
57.9
46.0
55.8drops
Magnitude of significant oil Price
Percent
47.3
50.6
Jan86- Oct90- Oct97- May01- Jun 08- Jun 140
Jul86
Apr91 Apr98
rude oil prices have been continuing
Second, in 2008, when Brent
Magnitude of significant oil Price-40
drops
to trend lower this year, averaging nearby futures contract
(today’s
Percent
$47.54/bbl in January 2015 Jan86and the
worldMay01price
indicator)
declined
Oct90- Oct97Jun 08Jun 14Jul86 Apr91 Apr98 Nov 01 Dec 08 Dec14
decline, in percentage terms, translates
to by 75 percent -60
from $146.08/
0
more than 55 percent since June 2014. The bbl (July 3, 2008) to $36.61/bbl
-80
speed of the decline is partly attributed to (December24, 2008).
Source: World Bank
-20
unexpected demand weakness in some
Third, during 2014-15, when
major economies, in particular emerging the Brent nearby futures contract
-40 months declined by 60 percent from
economies and the last three
witnessed a free fall in crude oil prices (see 115.06/bbl (June 9, 2014) to 46.77/
-60
Oil Price Movement)
bbl (January13, 2015). The current
oil price drop is the third largest
7-month decline of the past three
-80
Overflowing Supply
Bank
decades — only the 67 percent
The fall in oil prices in theSource:
last World
six months
is significantly similar with the 1985/86 drop from November 1985 to
episode, as the cause for decline in both March 1986 and the 75 percent
the cases was overflowing supply of crude drop from July to December 2008
oil. Between 1984-2013, episodes of oil were larger.
The graph (see Crude Oil)
price declines of more than 30 percent in
a six-month time frame occurred, mostly illustrates the zig-zag movement
coinciding with major setbacks in the of crude oil prices from a low of
global economy such as US recessions $50 to a high of $140 in the last ten
(1990-91 and 2001); the Asian crisis (1997- years and the clock has turned full
98); and the global financial crisis (2007-09). circle with the crude oil price of Jan
There have been only three occasions 2015 touching the Jan-2005 level.
28
since 1984 when the price of oil dropped
by 60 percent or more in any seven-month
period. First, during 1985-86, when the West
Texas Intermediate nearby futures contract
(WTI was the world oil price barometer at
that time) declined by 67 percent from
$31.72/bbl (November 20, 1985) to 10.42/
bbl (March 31, 1986).
0
Jan 86- Oct 90- Oct 97- May 01- Jun 08- Jun 14Jul 86 Apr 91 Apr 98 Nov 01 Dec 08 Dec 14
Magnitude Of Significant Oil Price Drops
Percent
0
-40
Jan 86- Oct 90- Oct 97- May 01- Jun 08- Jun 14Jul 86 Apr 91 Apr 98 Nov -60
01 Dec 08 Dec 14
-80
-20
-40
-60
-80
Crude oil ($/bbl)
150
125
100
75
50
25
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-15
Crude oil ($/bbl)
below $50/bbl for the first time in five-and-
150
Oil Futures Edge Lower
125
The oil futures market witnessed active
trading 100
in January 2015. Crude oil futures
prices continued their downward trajectory
over the 75
previous month driven by glut in
oil supplies and sluggish demand, with
50
both Nymex
WTI and ICE Brent ending
25
Jan-05
Percent
-20
-20
C
Nov 01 Dec 08 Dec14
Magnitude Of Significant Oil Price Dro
Source: World Bank
$/bbl
$/bbl
$/bbl
Source: IMF –Commodity Market Monthly Feb 2015
Crude oil Brent
Crude oil Dubai
Crude oil WTI
Monthly Average Monthly Average Monthly Average Monthly Average
Nov 2014
Dec 2014
Jan 2015
Feb 2015
Source: World Bank
Unit
Source: World Bank
Commodity
Jan-07
Jan-09
Jan-11
a-half years.
ICE Brent settled down at $49.76/bbl for
Jan 2015, while Nymex WTI lost $11.96/bbl
to finish the month at an average of $47.33/
bbl. Over the month, the benchmarks
declined by a massive 21% and 20%,
respectively. ICE Brent and NymexWTI lost
www.wealth-monitor.com
| April 2015
Jan-13
Jan-15
Sources: Monthly Oil Market Report Feb 9, 2015, OPEC; World Economic Situation and
Prospects 2015, United Nations, New York; Medium Term Oil Market Report 2015, OECD/IEA
ENERGY | Bearish Trend
nearly 60% of their values since their peak
in June 2014.
Moreover, compared with 2014, Nymex
WTI and Brent kicked off in Jan 2015 at
$47.53 and $57.35 from $94.86/bbl and
$107.11/bbl in January 2014, respectively.
On February 6, 2015, ICE Brent stood at
$57.80/bbl and Nymex WTI at $51.69/bbl.
Investors continued to bet on a rebound
in oil prices. ICE Brent net long positions
increased 27,468 to 143,039 contracts
during the final week in January, according
to figures from the ICE Futures Europe
exchange.
Speculators were also bullish on the
rising US crude oil market, increasing net
long positions by 16,937 contracts over
the month. Net long US crude futures
and options positions during the month
increased to 216,325 lots as per the US
Commodity Futures Trading Commission
(CFTC) data. Total futures and options
open interest volume in the two markets
increased in January 2015 by 543,889
contracts to 5.14 million lots.
The daily average traded volume during
January 2015 for Nymex WTI contracts
increased sharply by 183,929 lots to average
825,682 contracts. ICE Brent daily traded
volume also rose by 237,827 contracts to
834,344 lots. The daily aggregate traded
volume in both crude oil futures markets
increased by 421,757 contracts, up 34%,
to around 1.66 million futures contracts,
equivalent to around 1.7 billion barrels of oil
per day. The total traded volume in Nymex
WTI and ICE Brent was up sharply at 16.51
million lots and 17.52 million contracts,
respectively, over the month.
Growth And Oil Demand
The International Monetary Fund (IMF)
revised downwards its global growth
forecast by 0.3 percentage points (pp) for
both 2015 and 2016 at 3.5 percent and
3.7 percent respectively, as positive effects
from lower oil prices are being counterbalanced by weak investment.
Growth expectations for emerging
markets have been cut by 0.6 pp; Russia’s
economy is expected to shrink by 3.5% this
year, while China’s growth is expected to
fall below 7%, the weakest growth figure
in more than two decades. According to Oil
Monthly Market Review of IEA, for the year
2015, world oil demand is projected to rise
by 1.17 mb/d mainly to reflect expectations
of an uptick in oil requirements in OECD
Americas. In 2015, non-OPEC oil supply is
April 2015 | www.wealth-monitor.com
projected to grow by 0.85 mb/d, down 0.42
mb/d from the previous assessment. OPEC
NGLs are forecast to grow by 0.20 mb/d
to 6.03 mb/d in 2015. In January, OPEC
crude production decreased by 53 tb/d to
average 30.15 mb/d. Estimates suggest that
a 30 percent oil price decline could increase
global GDP by up to 0.5 percent. However,
both cyclical and structural factors might
affect the impact of oil price drop on
growth in 2015-16.
According to a World Bank study, low
oil prices have already led investors to
reassess growth prospects of oil-exporting
countries. This has contributed to capital
outflows, reserve losses, sharp depreciation
of currency in many oil-exporting countries
including Russia, Venezuela, Columbia,
Nigeria, and Angola. Financial strains could
imply adverse spill-over effects for partner
economies, through trade and financial
linkages, including remittance flows.
Demand-Supply Dynamics
Global oil demand in 2015 is currently
expected to rise by 1.17 mb/d. As prices
drop, oil requirements are likely to respond
positively, although this can be impacted by
other country-specific factors. For example,
in 2008, prices fell sharply with the onset of
the financial crisis and the global economic
recession, which led to deterioration in
demand. This time the sharp fall in prices
has been mainly driven by excess supply.
As a result, lower prices are likely to help to
accelerate the pace of oil demand growth
this time.
On the supply side, despite the fact that
the costs of extracting unconventional oil
may be above current oil prices, because
most of these costs are sunk, it will take at
least a year before supply moderates. On
the demand side, the International Energy
Agency expects further weakening, with
oil consumption projected to average 93.3
mb/d in 2015, according to the January
2015 assessment, down from 94.1 mb/d in
July 2014. Crude oil inventories continue
to rise, particularly in the US where crude
stocks are at record highs, and product
stocks are at near-record levels.
Middle East oil demand is dependent on
the performance of the various economies
in the region with the impact of lower
oil prices on their spending plans. For
2014, Middle East oil demand growth was
expected to hover around 0.25 mb/d, while
oil demand in 2015 is projected to grow by
0.29 mb/d.
OPEC’s Policy Change
OPEC traditionally influenced the oil prices
by adjusting its oil supply and acted as
the global oil market’s swing producer to
stabilize prices within the desired price
range (set to $100-110/bbl during 201114). This targeting of an oil price band
dramatically reversed course on November
27, 2014, when OPEC decided to focus on
preserving its market share instead by
maintaining its production level of 30 mb/d.
The change in policy implies that OPEC may
no longer act as the swing oil producer.
Price Outlook
The interplay of demand and supply will
drive the price up and down in the coming
months and the nominal oil prices are
expected to average $53/bbl in 2015, 45
percent lower than 2014, according to the
forecast of the World Bank. However, it is
common knowledge that several OPEC and
non‐OPEC oil producers rely heavily on oil
revenues to finance their fiscal budgets.
If crude oil prices continue to trade in a
less than expected price climate, the oil‐
dependent producers will have to make
tough decisions which could potentially
force some countries to plug the supply
flow to drive the price up. Potential new
supply disruptions cannot be ruled out
in a lower price scenario and present an
uncertainty in the oil price forecast.
29
AGRI/SOFT | Price Trends
n
e
t
f
o
S
To
d
e
t
c
e
p
Prices Expected
To
Soften
x
E
s
e
c
i
Pr
Grain prices are projected to decline almost 4% in 2015
Monthly Price Movement
30
Commodity
Unit
Nov 2014
Dec 2014
Jan 2015
Wheat, US RW
$/mt
258.7
269.6
248.5
231.12
Rice
$/mt
418
418
420
420
Sugar
$/kg
0.36
0.34
0.34
0.32
Meat
$/kg
6.07
5.89
5.69
5.71
Source: World Bank
Oil Price Movement
Commodity
Unit
Feb 2015
Rice Product
Wheat Production,
Utilization and Stocks
Wheat
Production
Million tonnes
720
Million tonnes
260
670
220
620
180
570
140
Million tonnes, mi
520
470
520
04/05
06/07
08/09
Production (Left axis)
10/11
12/13
14/15
f’cast
100
Utilization (Left axis)
Stocks (right axis)
420
Source: FAO
G
lobally, agriculture prices have been Price Outlook
showing a downtrend. A cursory
look at select commodities reveals Wheat
that there is a general decline in food Global wheat production, according to
prices and the trend is likely to continue. the Food Outlook Report of FAO, last year
Agricultural prices declined almost is estimated at 718.5 million tonnes, a
5 percent in 2014 (before recovering marginal increase from the 2013 record
Base Metals
Price
Movement
marginally
in 2015)
based
on good crop output. Large production gains are
prospects. Some variation in agricultural expected for the Russian Federation, as
Monthly Average Monthly Average Monthly Average
Commodity
Unit
prices
is expected, however.
well as
China
which
will more
Nov 2014
Dec
2014and India, Jan
2015
Grain prices are projected to decline than compensate for smaller crops in
almost 4 percent in 2015. Although prices Australia, Canada and the United States.
Aluminium
$/mt
1815
2056
1909
of other food items will remain almost World wheat trade in 2014/15 (July/June)
copper
$/mt
5831
6713
6446to 150 million
unchanged in 2015, some small declines contracted
tonnes, 7.3
in soft
meat prices$/mt
(e.g., chicken)15807
will be million 15962
tonnes (4.6 percent)
below the
Nickel
14849
offset by increases in beef. Most price risks record level of 2013/14. The reduction was
Zinc
2113 demand
2176
in agriculture
are on$/mt
the downside.2253
mainly attributed
to lower import
in Asia and Africa, more than offsetting
aFAQ
riseInternational
in Europe.
Despite a record crop,
Meat Price Index (2002-2004=100)
purchases of high quality wheat by the
210
EU are likely to remain large.
Total wheat
2013/14
utilization in 2014/15 is put at around 701
200
million tonnes, 1.7 percent higher than in
2013/14.
190
2012/13
Given this season’s prospect for
large
180 supplies of feed quality wheat, usage
2011/12
by the livestock sector
is likely to show
a
strong
growth
after
two consecutive
170 O
J
A S
F
M A M J
N D J
seasons of declines. Global wheat
inventories are forecast to reach 192.4
million tonnes by the end of seasons
in 2015, their highest level since 2003.
Based on latest forecasts for stocks
and utilization, the world wheat
stock-to-use ratio increased from 25.2
percent in 2013/14 to 26.9 percent in
www.wealth-monitor.com | April 2015
Monthly Average Monthly Average Monthly Average Monthly Average
370
04/05
06/0
Produc
Stocks (
World Su
Asia
South America
Europe
Central America
Africa
North America
Oceania
World
Developing coun
Developed count
AGRI/SOFT | Price Trends
Sources: Agri Commodities Outlook 2015, Rabo Bank; Food
Outlook-Bi Annual Report on Global Food Markets –FAO
2014/15, while the ratio of major wheat
exporters’ closing stocks to their total
disappearance rose from 14.1 percent to
15.6 percent, reflecting this season’s ample
supply situation. Against this background,
international wheat prices have come
under strong downward pressure in recent
months. Wheat prices may experience a
downtrend.
d Stocks
Million tonnes
260
Rice
Prospects of a bumper rice production
waned in the past few months, reflecting
erratic weather conditions across all
regions, and the production in 2014, is
expected to fall marginally (by 0.4 percent)
to 496.4 million tonnes. The major output
shortfalls, in absolute terms, are expected
in India, Indonesia, Nepal, Sri Lanka and
Thailand. Taking advantage of the lower
international prices and in anticipation
of possible production setbacks, many
countries have started buying rice actively
from world markets during the course
of 2014. This strong import demand,
combined with large supplies in major
exporting countries sustained a 7 percent
increase in the volume of rice transactions
in calendar 2014 to a record 39.7 million
tonnes.
Going forward, world rice trade is
expected to grow further in 2015, although
by only 0.7 percent, to about 40 million
tonnes. African countries are predicted to
drive the expansion in world imports, while
inflows to Asian countries may contract.
Ample supplies in exporting countries are
also expected to underpin trade in 2015.
Global rice utilization is forecast to
hover around 500 million tonnes in
2014/15, 1.7 percent more than in 2013/14,
sustaining a fractional increase in per
capita consumption to 57.5 kg. With world
production falling short of utilization,
world rice inventories ending in 2015 are
forecast to be trimmed for the first time
Rice
Utilization and Stocks
RiceProduction,
Production
12.4
2013/14
69.6
470
420
370
04/05
210
200
Asia
South Am
Europe
190
2012/13
Central A
Africa
180
North Am
Oceania
2011/12
170
Wor
2013/14
O
N
D
J
F
M
A
M
J
J
A
S
World
Develop
Develop
World Sugar
Production
South America
Europe
48.1
12.7
Central America
Africa
7.7 4.8
14.6
70.1
2014/15
26.1
Million to
520
Asia
million tonnes
24.9
Rice P
Stocks (right axis)
FAO International Meat Price Index
FAQ International
Meat Price Index (2002-2004=100)
(2002-2004
=100)
Source: FAO
8.1 4.6
14.5
international level, prices have remained
high by historical standards for the past
three years, with the FAO Meat Price Index
generally hovering around 185 points.
Since April 2014, the Index has registered
upward movement, reaching 208 points
in September 2014. Global meat trade is
expected to expand at a moderate rate
of 2.3 percent in 2014, to 31.6 million
Wheat Production,
Utilization
and would
Stocks be
tonnes.
The projected
growth
less
than
the
average
for
recent
years,
Million tonnes
Million tonnes
260
720 to a variety of factors, including
due
production
constraints
in
some
of
the
220
670
principal exporting countries, animal
180
620
health
concerns and trade restrictions.
Poultry
remains
the
main
product
traded,
140
570
representing 43 percent of the total meat,
100
520
followed
by
bovine.
price12/13
of meat
04/05
06/07
08/09 The
10/11
14/15 will
f’cast
be dearerProduction
in the
near
future.Utilization (Left axis)
(Left
axis)
million tonnes
North America
Oceania
47.9
Developing countries
Developed countries
2013/14
2014/15
182.2
141.6
40.6
183.9
142.2
41.7
(million tonnes)
Source: FAO
220
470
150
420
100
180
140
14/15
f’cast
100
370
2-2004=100)
04/05
06/07
08/09
10/11
Production (Left axis)
n (Left axis)
14
Sugar
Falling sugar outputs in Brazil, China and
Pakistan in 2014/15 are likely to be offset
by surplus production in India, the EU
and the Russian Federation. World sugar
consumption is set to grow in line with
falling domestic sugar prices as well as
improved economic performance in
2015. This positive economic prospect
is supportive to sugar demand, as
manufacturing and food preparation
sectors, which account for the bulk of
aggregate sugar consumption, are greatly
influenced by the economic environment.
Sugar consumption growth will be
particularly pronounced in Asia and Africa.
Fall in international sugar prices would
stimulate global import demand and boost
world sugar trade in 2014/15. Exports from
Brazil would remain unchanged, the world’s
largest sugar producer and exporter, and
Thailand would export surplus sugar. Sugar
prices would remain range bound and any
disruption in sugar supply would push the
price northwards.
World
Million tonnes, milled eq.
200
Million tonnes, milled eq.
520
in ten years. However, their volume is
projected to remain huge, sufficient to
cover more than a third of the 2015/16
projected rice consumption. Hence, the
price may not trend upwards.
12/13
14/15
f’cast
Utilization (Left axis)
Stocks (right axis)
Source: FAO
World Sugar Production
April 2015 | www.wealth-monitor.com
2014/15
2013/14
Asia
million tonnes
70.1
69.6
50
Meat
The FAO Meat Price Index reached an
historic high in April 2014, and has
continued to increase since then. While
the price situation varies among the
different types of meat, there is no sign
of an overall decline in meat prices. At the
31
31
CURRENCIES | Dollar Dominates
RIDING THE
GREENBACK
US Dollar is expected to strengthen further
T
32
he year 2015 would see a stronger
dollar with good support both from
fundamentals and flows. The oil price
shock has acted as a stimulant for the dollar
in the short term. With good economic
prospects in the US in 2015, the dollar
would continue its onward march. The
economic recovery in the US was stronger
than expected, following the contraction
in the first quarter of 2014.
It was driven by recovery in labour
markets and consumer confidence, and
investment on the back of high levels of
capacity utilization.
In the US, prospects for demand over
the near term are solid, underpinned by
strong employment growth. There are
no major wage inflation pressures, which
should give the Federal Reserve room for
normalizing rates. Growth is projected
to exceed 3 percent in 2015-16, with
domestic demand supported by lower oil
prices, more moderate fiscal adjustment,
and continued support from monetary
policy despite the projected gradual rise in
interest rates.
The US dollar has appreciated against
all major currencies since June 2014,
gaining over 16% on a trade weighted
basis. The rally has been fundamentally led
by relative economic growth and central
bank policies and technicals have been
playing supporting roles.
The US dollar has
appreciated against all
major currencies since
June 2014, gaining over
16% on a trade weighted
basis
Euro
Disappointment in the economic outlook
coupled with aggressive central bank
action and large outflows are likely to drive
the EUR down. The economic recovery in
the euro zone remains quite modest and
the euro (EUR) has reacted accordingly.
The EUR lost 12% in 2014 and is
expected to depreciate further in 2015. In
the euro area, the economic outlook has
deteriorated and falling oil prices may put
downward pressure on already declining
inflation expectations. Economic activity
will be supported by lower oil prices,
further monetary policy easing and a more
neutral fiscal policy stance, and the recent
euro depreciation. But these factors will be
offset by sluggish investment, reflecting
the impact of weaker growth in emerging 6.30
1.75
market economies on the export sector. 6.26
1.71
1.67 Prospects are also uneven across the 6.21
1.63
euro area. Improving labour markets will 6.17
1.59
GBPUSD
support
domestic demand in Germany, and 6.12
1.55
the gradual recovery of demand in Spain 6.08
1.51
is expected to continue. The recoveries in 6.03
1.47
Feb-14
Italy
FranceAug-14
will be
moreFeb-15
gradual. In
Feb-14 and
May-14
Nov-14
USDC
May-14
123
1.40
119
1.35
1.30
115
EURUSD
111
1.25
107
1.20
99
Feb-14
1.15
1.10
Feb-14
USD
103
May-14
Aug-14
Nov-14
Feb-15
www.wealth-monitor.com | April 2015
May-14
the euro area, growth in the third quarter of
2014 was modestly weaker than expected,
largely on account of weak investment. The
data releases for December and January
show deflation for the area as a whole
— the first negative reading since 2009.
Inflation expectations declined further,
below the ECB’s two percent medium term
price stability objective — raising risks of a
protracted period of low inflation.
GBP
GBP is likely to outperform EUR. In the
United Kingdom, short-term indicators
point to a slowdown in economic activity,
while inflation has fallen to very low levels.
While economic activity will be supported
by higher real disposable income in view
of falling energy prices, survey indicators
point towards a near-term slowdown in the
pace of expansion.
Annual CPI inflation eased further to
0.5% in December 2014 owing to lower
energy prices. At the same time annual
CPI inflation excluding food and energy
remained broadly stable at around 1.3%.
1.75
6.30
1.71
6.26
1.67
6.21
1.63
1.59
6.17
GBPUSD
6.08
1.51
6.03
Feb-14
1.47
Feb-14
USDCNY
6.12
1.55
Sources: Foreign Exchange Outlook, Feb 2015, Scotia Bank; Outlook 2015- A year of
Opportunity – Forex Com; Source for currency charts: Scotia Bank
Feb-15
CURRENCIES | Dollar Dominates
May-14
Aug-14
Nov-14
May-14
Aug-14
Nov-14
Feb-15
Feb-15
indicators point to a return to positive,
albeit weak, growth in the fourth quarter.
6.30
1.75
CNY
At the end of 2014 the government
1.40
6.26
1.71
The Chinese Yuan (CNY) is likely to remain
announced a stimulus package and a
1.35 best performing currency among
1.67
6.21
the
reduction in the effective corporate tax
EURUSD
1.63
the
1.30 emerging market currencies strongly
6.17
rate in order to support growth.
111
backed by its economy. In China, growth
1.59 GBPUSD
Meanwhile
annual consumer price
JPY
6.12
USDCNY
1.25
107
USDJPY
slowed to 7.3 percent in the fourth quarter,
1.55
inflation
continued
to ease to 2.4% in
The
outlook
for
the
Japanese
yen
(JPY)
6.08
1.20
103
bringing
2014 growth to 7.4 percent,
1.51
continues to be a broad weakening in the November, driven largely by lower energy
6.03
99
1.15
broadly
in line with the government’s
prices. Lower
may
economically
currency.
In Japan,
the Aug-14
economy
fell into
1.47
May-14 oil prices
Aug-14
Nov-14
Feb-15
Feb-14
May-14
Nov-14
Feb-15 Feb-14
target.
Growth
momentum
in
China
has
1.10
recession
inNov-14
the third
quarter of support the Bank of Japan’s drive towards
Feb-14 technical
May-14
Aug-14
Feb-15
Feb-14
May-14
Aug-14
Nov-14
Feb-15
slowed and inflation remains low. Annual 2014. The consumption tax increase in the 2% inflation.
consumer price inflation – at 1.5% in previous quarter had impacted private
domestic demand more than anticipated,
6.30
123
1.40
despite a cushion from increased
119
6.26
infrastructure spending.
1.35
115
6.21
As Japan’s economy failed to regain
EURUSD
1.30
111
sustained traction after the hike in VAT in
6.17
1.25
April,
the
government
announced
further
107
USDJPY
6.12
USDCNY
fiscal stimulus measures. The second data
1.20
103
6.08
release confirmed the decline in Japanese
99
1.15
real GDP by 0.5% quarter on quarter in
6.03
Feb-14
May-14
Aug-14
Nov-14
Feb-15
Feb-14
May-14
Aug-14
Nov-14
Feb-151.10
the third quarter of 2014. High-frequency
December – hovered at close to two and
a half-year lows and is expected to decline
further,123reflecting both the slowdown
119
in demand
and the current weakness in
commodity
markets.
115
Feb-14
April 2015 | www.wealth-monitor.com
123
119
May-14
Aug-14
Nov-14
Feb-15
33
ARABIAN BOURSES | In Recovery Mode
Waiting For Catalysts
A slide in oil price puts a chill on GCC markets
34
Market Capitalisation of Stock Exchanges (in $bn)
79.6
87.9
126.8
123.4
483.4
518.7
110.5
Q2, 2014
Q4, 2014
100.3
21.5
22.0
38.7
37.8
173.2
185.4
99.0
Saudi Stock Exchange (TADAWUL)
125.5
Qatar Stock Exchange (QSE)
550.2
Muscat Stock Exchange (MSM)
Bahrain Bourse(BHB)
101.4
As at March 5, 2015
Kuwait Stock Exchange (KSE)
54.2
Abu Dhabi Securities Exchange (ADX)
24.8
Dubai Financial Market (DFM)
Source: Arab Federation of Exchanges, Zawya and Reuters
A
fter a lacklustre performance in H2 2014, the
stock markets in GCC in 2015 have been gaining
traction.
The stock market trade volumes in the second half
of 2014 in GCC was modest and mirrored the fall in oil
prices of more than 55 percent since June 2014 but
there is a reversal of this negative trend in 2015.
According to Monthly Market Research report by
Kuwait Financial Centre (Markaz), MENA markets ended
February in green, as Brent crude rose 18%. Egypt
(-5.2%) was the only index that ended the month in
red, while the top performing markets for the month
were Dubai (5.2%), Abu Dhabi (5.2%), and Saudi Arabia
(4.9%).
The UAE markets seemed to recover from the bearish
trend, and find a ‘new normal’, as the Dubai Financial
Market registered a 5.2% increase in February, on the
back of oil price rebound and good performance
of property stocks. The Abu Dhabi bourse surged
5.2% on the back of Etisalat, the country’s largest
telecommunications firm, posting a 9% increase for the
month of February, the report added.
Saudi CMA announced that it is on track to opening
up its markets to foreign investors in the first half of this
year, a move that is expected to catapult the Tadawul
into the MSCI emerging markets index.
Blue chips had a positive month as nearly all ended
the month in green. Saudi Electric (Saudi Arabia) was
the top performer among the blue chip stocks in the
region, recording a 22% increase, after announcing a
bonus payment of USD 150-200mn, following a royal
decree.
Shares of Kingdom Holding (Saudi Arabia) rose 17%
in February, as the company indicated its plans to sell
shares in a significant number of private companies in
local and international IPOs. Emaar Properties (Dubai)
also rose by 13%, after posting a 28% increase in yearly
earnings. Zain (Kuwait) rose 11.5% in the month of
February, as Kuwait and Sudan entered into talks to
help repatriate USD 280mn from Sudan, sometime in
2015, the report added.
182.5
MENA Market Trends – February 2015
Index
S&P Pan Arab
LargeMid Cap
M. Cap
(USD Bn)
Last 2014 Feb-15 YTD
close
%
%
%
P/E
TTM
Div.
Yield
134.2
174
1.8
1.1
6.5
15.68
3.63
Saudi Arabia
499.4
9,314
-2.4
4.9
11.8
16.93
3.58
Qatar
153.2
12,445 18.4
4.6
1.3
14.98
3.82
Abu Dhabi
119.5
4,686
5.6
5.1
3.5
10.79
Kuwait Price
99.5
6,601
-13.4
0.4
1.0
16.06
4.66
3.40
Kuwait Wt.ed
99.5
458
-3.1
3.6
4.3
16.06
3.40
Dubai
89.2
3,865
12.0
5.2
2.4
10.34
6.12
Egypt
70.3
856
23.5
-5.2
2.7
12.42
2.37
Morocco
54.3
10,461
5.6
2.3
8.7
16.80
4.13
Jordan
22.1
4,182
- 2.3
0.2
-1.3
14.24
4.74
Bahrain
23.1
1,475
14.2
3.5
3.4
10.19
4.40
Oman
18.3
6,559
- 7.2
0.0
3.4
8.87
4.31
Source: Markaz, * - Average Daily Value Traded for the month, ** - 3-year daily return correlation
Stock Exchange
Q2,
2014
Q4,
2014
As at March 5,
2015
www.wealth-monitor.com | April 2015
Saudi Stock Exchange
(TADAWUL)
Qatar Stock Exchange
(QSE)
518.7
483.4
550.2
173.2
185.4
182.5
GLOBAL VIEW | Caution Prevails
Divergent Growth
Global economic growth continues to be sluggish in 2015
US Equities Perk up
The equity markets in the US is seeing
rising investor interest and the S&P 500
registered an increase at 5.7% in February
2015 largely on account of positive signs
of economic recovery. Strong performance
from cyclical sectors and technology stocks
in anticipation of the US consumer-led
recovery pushed the market sentiments.
Mixed housing market data, with news
from the Department of Commerce
(DOC) that both single family home starts
and home sales dropped in January, did
not dampen market sentiments and the
potential for an improved labour market
and wage growth added a new impetus to
the housing market. The DOC also reported
core durable goods orders bounced back
by 0.3% in January 2015, reversing declines
of the previous two months to bolster the
view of improved business confidence.
Europe Markets Back in Spotlight
European financial markets were back
in the spotlight in Feb 2015. Eurozone
stock markets enjoyed another month
of strong gains, aided by improving
economic data as well as optimism over
the ECB’s forthcoming sovereign bondbuying programme. The MSCI EMU index
returned 7.3% in February 2015. An easing
of worries over Greece also supported
equity gains, as did news of a ceasefire
agreement between Russia and Ukraine.
Eurozone GDP expanded by 0.3% in the
fourth quarter of 2014, better than the
0.2% growth in the third quarter.
The European Commission upgraded
its growth forecasts for the euro zone to
1.3% from 1.1% for 2015 and to 1.9% from
1.7% for 2016. Purchasing Managers’ Index
(PMI) data for February showed the euro
zone composite index at 53.5, a sevenmonth high. Preliminary inflation figures
showed improvement at -0.3% month-onmonth for February compared to -0.6%
the previous month. Consumer durables
sector continued to perform well while
the energy sector drew support from the
recovery in oil prices. By contrast, the more
defensive utilities and consumer staples
sectors
underperformed.
Peripheral
markets fared best with the Italian stock
market one of the top regional performers.
Japanese Markets on Fire The Japanese stock market rose strongly
throughout February 2015, with the
TOPIX Index registering a rise of 7.7%. All
financial and real estate sectors posted
strong gains that had previously lagged
for many months. Defensive stocks such
as foods and pharmaceuticals tended to
underperform while airlines, utilities and
rubber products all experienced decline in
absolute terms despite the overall strength
of the market.
Foreign investors were net sellers into
the market rise during early February, in a
reversal of the usual trend. In contrast, trust
banks have emerged as net buyers, with
the natural assumption being that this
reflects an increased allocation to domestic
equities by public pension funds. The
labour market data showed a slight rise in
the unemployment rate, although labour
market conditions remain tight. Retail sales
showed a decline despite the impact of
lower gasoline prices.
35
April 2015 | www.wealth-monitor.com
GLOBAL VIEW | Caution Prevails
36
EMs Face Headwinds
MSCI
Emerging
Markets
index
underperformed, compared to the MSCI
World in February this year. Emerging
European equities recorded strong
performance. Positive signs of an
improvement in the situations in Greece and
Russia, following a ceasefire agreement in
Ukraine and perceived progress in Greece/
Euro bloc negotiations, underpinned
positive returns. Russian equities and the
rouble experienced a significant rebound.
The rouble strengthened by 12.5%.
Emerging Latin American markets posted
solid returns. Mexico was the best market
with consumer segments leading the
market higher.
Colombia was the regional laggard
amid ongoing concerns over the impact of
measures implemented to offset the loss
of oil revenues. The majority of emerging
Asian markets registered positive returns,
but lagged the benchmark. Taiwan’s
economic data was largely positive with 4Q
GDP increasing 3.4% year-on-year, exports
up 3.4% and manufacturing PMI reaching
51.7. Korea delivered a marginally positive
return but underperformed, with large
index stock Samsung Electronics posting a
negative return.
Chinese equities gained strongly despite
weaker economic data that saw HSBC’s
widely-watched January manufacturing
PMI contracting for the second consecutive
month at 49.7, just below the 50 level that
The proposed ECB’s asset
purchase programme has
continued to drive down
bond yields and pushed
up bond prices across the
Eurozone
separates growth from contraction. Indian
stocks notched up another month of gains
in February, 2015 owing to the proposal of
a cut in corporate tax from 30% to 25% and
other pro-reforms measures in the budget.
Emerging markets (EM) face a number of
macroeconomic challenges in 2015 such as
strong US dollar, weaker commodity prices,
and slowing growth in China. Historically,
emerging-market equities have generally
benefited from a declining USD and
strengthening commodity prices. However,
in the second half of 2014, major currencies
depreciated significantly relative to the
USD, contributing to the negative returns
posted by emerging-market equities in
USD terms. Falling global demand and
increased supply from energy and other
commodity producers have caused oil and
commodity prices to plummet, resulting in
a global disinflationary environment and
a significant headwind for EM commodity
producers.
China’s demand for commodities has
moderated, as the medium-term growth
trend in China continues to slow down
due to the elevated levels of outstanding
credit and housing prices after an
extended boom. Falling commodity prices
weigh particularly heavily on the growth
outlook and financial backdrop of major
commodity exporters, such as Russia,
Brazil, and South Africa.
Treasury Yields Likely To Move Up
The proposed ECB’s asset purchase
programme has continued to drive down
bond yields and pushed up bond prices
across the Eurozone. Two-year yields on
www.wealth-monitor.com | April 2015
Sources: Schwab 2015 Market Outlook; BlackRock - Dealing with Divergence 2015 Investment Outlook; Turcan Connel
Asset Management-Financial market overview Feb 2015; Schroders Monthly markets review-Feb 2015; www.dealogic.com
GLOBAL VIEW | Caution Prevails
nine Eurozone government bonds have
fallen into negative territory in anticipation
of the ECB’s bond-buying programme.
The ECB will be purchasing bonds based
on each country’s contribution to overall
Eurozone economic output (the ‘capital key’
method); German bunds will be the main
beneficiaries. With yields in the Eurozone
likely to slip further into negative territory
as the ECB begins its bond purchases, UK
gilts (with ten-year yields currently around
1.75%) are looking increasingly attractive.
Investors in Europe will look to UK gilts for
better returns and income. The possibility
of an interest-rate hike in the US this year
means treasury yields are likely to move
up. German and UK bonds will remain
investors’ favourites.
The high yield corporate bond segment
had a rough ride in 2014, as yields on
bonds issued by US energy companies
surged with the collapse in oil prices.
General financial and economic concerns
also affected the high-yield market, but
companies are fundamentally in good
financial health in 2015 and the macro
economy is growing and companies’
interest expenses remain
historically low in the US.
Expected returns on
bonds issued in the
emerging market (EM)
will be low. This applies
mostly to bonds in
oil-producing
co u nt r i e s
that also risk
a decline in
their currency,
w h e r e a s
countries that are net
oil importers are better
placed. The year, investor
interest in EM debt may
increase as EM growth picks
up, oil prices rise and
uncertainty about the
Federal
Reserve’s
policy eases.
Hedge
Funds
Deliver
Stable
Returns
Hedge
funds
deliver stable riskadjusted return year
after year. Their
correlation
with
other asset classes
April 2015 | www.wealth-monitor.com
is quite low. This helps reduce the risk in
a portfolio that consists of equities and
bonds, while at the same time increasing
the risk-adjusted return. Different strategies
have varying return potential and a market
situation that may be highly favourable for
one strategy may be the exact opposite for
another. The performance of the hedge
funds depend on strategies and may
change return potential in both directions.
Private Equity is yet to pick up. According
to Dealogic, private equity deals worth
$19.9 billion were made up to Feb 2015
Hedge funds deliver
stable risk-adjusted
return year after year.
Their correlation with
other asset classes is
quite low
globally, down 53% from $42.7 billion in
2014 and the lowest amount on record
since 2002.The drop is particularly stark
in the US, where deal making has only
reached $7 billion for the year, about a
third of the $22.1 billion a year earlier.
The first quarter is often fairly slow
on the deal-making front, but this year’s
sluggish start is also likely attributable to
rising valuations, spurred along by cash
rich corporate acquirers who can bid up
assets.
Total global IPO activity during Jan-Feb
2015 stands at 150 listings raising $24.8bn.
Both volume and activity are down yearon-year, from 166 IPOs raising $29.2bn in
the same 2014 period
Global Investment Outlook
Equities: The US equities as well as Asian
emerging market stocks are expected
to perform well on the back of
expected global economic recovery
and stable corporate earnings. In an
environment of low interest rates,
equities look promising as a longterm investment.
Bonds: For investors with
a higher risk appetite,
emerging market bonds
in local currencies with a
yield of around 6.5 percent
is a good buy.
Gold: Gold is expected
to witness a moderate
performance
with
a
downside potential for
a price risk and will
normally trade in the
range of USD1140-1180/
toz.
Real estate: First-class
office and retail real
estate are an interesting
investment opportunity
as
they
are
both
expected to gain from
the
positive
global
economic environment on a global
basis. The investment focus is
on properties with stable
returns in the USA, as
well as selected locations
in Europe and Asia.
37
TAKING STOCK | Islamic Credit Cards
Gaining
Currency
Islamic credit cards are gaining acceptance
and are issued parallel to conventional
credit cards, providing customers with an
alternative investment philosophy
T
he emergence of a distinct Islamic
Credit Card is a natural progression
in the growth of Islamic financial
services industry that are governed
by Shariah principles and transactions
should be free from prohibited activities
and elements such as riba (usury), maisir
(gambling) and gharar (ambiguity). The
cardholder need not necessarily have to be
a Muslim to get a Shariah-compliant card.
How It’s Different
Islamic credit cards are conceptually
different from conventional credit cards.
Islamic credit cardholders are allowed to
use the card only for shariah-compliant
transactions and non-halal transactions
incurred in bars, discos, night clubs and
gambling are declined.
Types
Generally, there are three groups of Shariahcompliant credit card arrangements
available to customers.
• The cardholder is provided a line of credit
and a monthly or yearly usage fee tied
to the outstanding balance of the line of
credit.
• The cardholder is allowed to buy an
item with a card and, instantly, the bank
purchases the item before selling it to the
cardholder at a higher price.
• A lease-purchase agreement where the
bank holds title to the purchased item until
the cardholder makes the final payment.
38
Terms and fees of different types of
Islamic credit cards can vary depending
upon the financial institution as well as
the region and the local competition.
In general, with line-of-credit cards, a
customer can expect to pay usage fees
equal to 5 percent to 10 percent of the
outstanding balance and with the other
type of cards, a cardholder is usually
required to maintain a deposit.
To qualify as Shariah-compliant, a
financial institution must have an internal
review board of experts in Islamic law
to certify that the credit card conforms
to Shariah principles. Despite their
complexity, Shariah-compliant credit
cards have more in common with their
traditional counterparts.
Islamic Credit Card
Conventional Credit Card
Interest
No interest is charged. Bank
is compensated with a fixed
monthly fee.
Interest is variable, depending
on the outstanding amount.
Collateral
Collateral is required in many
cases; most banks require an
underlying
deposit
or
undated check.
No collateral needed.
Contract type
Lease-based.
Loan-based.
Transaction
restrictions
The purchase of alcohol,
tobacco, gambling, pork,
and sexually-related items
are forbidden.
There are no such restrictions
on items that can be purchased.
Profit
Margin On
Deposits
Fixed. Profit is shared between
the bank and customer and
is not compounded.
Late payment
fees
Fixed amount + 3 percent of
outstanding balance; the 3
percentis typically donated
to charity.
No deposits.
Variable, compounded.
www.wealth-monitor.com | April 2015
BLUE CHIP | Peer-to-Peer Finance
Every month in Blue Chip section, Wealth Monitor delves deep into an innovative idea or
innovative development happened recently, either locally or internationally. This month Craig
Moore, Founder and CEO of Beehive, explains the concept of Peer-to-Peer Finance
From “Many to Many”
The Promise and Appeal of Peer-to-Peer Finance
O
40
ver the past few years, a surge in
the amount of research, number
of organizations and events
dedicated to the small to medium sized
enterprise (SME) space has taken the world
by storm. A common theme has been
the essential roles SMEs play in a nation’s
economic fabric as well as their crucial
role in advancing innovation, growth and
prosperity. The buzz and the growing
interest has rallied stakeholders and raised
awareness of the importance of SMEs. But
more than anything, the newfound interest
in SMEs has highlighted the significant
challenges they face.
Chief among those challenges remains
access to capital. In the UAE and the wider
Middle East region, many small businesses
are simply unable to access favourable
financing terms or secure reasonable credit
terms in a timely manner. The difficulty in
applying for financing from banks, their
fees and the rates they charge all make
traditional financing prohibitive for most
small businesses.
This severely impedes SMEs’ ability to
grow, expand and reach their potential,
with negative consequences for economic
growth, innovation, and macro-economic
robustness.
With banks and other conventional
lenders reluctant to take chances on
small-business loans, numerous reports
have highlighted the fact that this gap is
largely the result of a mismatch between
the needs of the small businesses and the
supply of financial services which are more
easily accessed by larger firms.
This is even more pronounced in
emerging markets like the UAE, which has a
healthy SME sector of about 300,000 SMEs
that account for around 60% of GDP and
over 90% of employment. Yet while they
form the backbone of the economy, they
still suffer from a lack of funding options
that give them the credit they need with
suitable terms. This is supported by the
International Finance Corporation’s (IFC)
estimate that the current SME funding gap
in the MENA region is valued at around
USD$260 billion.
The allure of peer-to-peer
financing is obvious and
makes it highly attractive
for businesses looking
for lower-interest finance
than they can secure
through a bank, as well
as for investors who want
higher-than-market,
steady returns
The massive credit gap that has resulted
is driving a critical need for alternative
finance solutions to fuel growth in this
critically underserved sector of the
economy.
A few years ago, the considerable success
and growth of the Peer-to-Peer (P2P)
finance model in the UK and US, where
the concept was first launched 10 years
Craig Moore, Founder and CEO,
Beehive
ago through companies like Zopa, Prosper
and Lending Club, caught my attention.
The explosive rise of these companies and
rapid development of the model in more
advanced markets had already received
great traction in the media and with the
public. I decided to do some homework
and started speaking with SME owners
in the UAE and looking into the available
sources of financing for small business here
to consider the viability of the P2P concept
locally.
Borrowing from tried and tested
concepts in crowdfunding, peer-topeer (P2P) finance is a simple, novel way
of raising money using the Internet’s
network-effect to get a large number
of people contributing a small amount
of money individually. This reduces the
risks for investors and pools money
together, helping eliminate the cost and
www.wealth-monitor.com | April 2015
BLUE CHIP | Peer-to-Peer Finance
complexity of conventional finance. This
approach, supported by a robust credit
assessment model and legal structure,
means businesses end up getting access to
lower cost finance much more quickly and
investors get better returns on their money
while diversifying their risk.
Having operated an SME myself, I know
the frustrations faced by SMEs trying to get
credit to fuel their growth.
The allure of peer-to-peer financing is
obvious and makes it highly attractive
for businesses looking for lower-interest
finance than they can secure through a
bank, as well as for investors who want
higher-than-market, steady returns. The
online nature and technology efficiencies
of P2P platforms significantly reduces the
cost of transaction versus their bricksand-mortar counterparts, enabling them
to provide a source of finance for smaller
businesses looking for smaller amounts..
The fact that individual investors bid and
compete to finance business requests
means that an auction (think reverse eBay)
ensures the lowest blended rate is offered
to the SME. Additional factors adding to
the model’s appeal include the ability to
quickly make a financing request, plus its
ease-of-use and transparency, especially
when compared to traditional sources of
finance.
The results of my research and
examination of the UAE market confirmed
my assumptions and I started identifying
the team, including the former CEO of
Emirates NBD Rick Pudner, and building
the platform in 2013. Last November,
Beehive was launched as the first peerto-peer financing platform in the UAE,
authorised and regulated by the DMCC,
with a vision to transform the local credit
market and increase the options that SMEs
have to obtain finance. With an operational
structure modelled on global best practice
and robust investor protections in place,
Beehive’s regional ambition is connecting
for growth.
Through the use of innovative
technology, Beehive set out to create
a marketplace that directly connects
established businesses with smart
investors so that SMEs get faster access to
lower cost finance and investors get better
returns and manage risk by diversifying
their investments. Businesses seeking
investment between AED 100,000 and
April 2015 | www.wealth-monitor.com
Invoice Financing
Beehive, the UAE’s pioneering online
marketplace for peer-to-peer finance,
recently launched its SME Invoice
Financing product to help the thousands
of SMEs in the country ease cash flow
issues and reach their full potential. The
new Invoice Finance solution helps SME
businesses boost their working capital
and improve cash flow, by unlocking the
value of their accounts-receivable to ease
the dual challenges of rising inflation and
late payments. The service supplements
Beehive’s existing and growing Business
Finance product, which has already
supported over 12 businesses since
launch.
Invoice financing is a rapidly growing tool
for SMEs to manage cash flow by closing
the gap between the moment a business
AED 500,000+ gain access to individual
investors who bid to provide the financing,
choosing how much they will finance and at
which rate. The businesses receive funding
typically in 14 to 18 days, depending on
the length of auction, and investors receive
monthly repayments at target rates of
between 8% and 20%.
The response to Beehive and the P2P
concept has so far been tremendous, with
SMEs and all kinds of investors supporting
the launch of our business model and
helping to spread the word in the UAE. The
timing was absolutely right for the UAE
to embrace P2P finance, and to provide a
template for the rest of the region as to how
the P2P model serves to benefit businesses,
investors and the wider economy.
To date, a wide spectrum of businesses
have used the Beehive platform, from
an HR consultancy, digital agency and a
coffee supplier, to a pet supplier and plastic
manufacturer. Our investor base is equally
as varied and includes investors across
different nationalities and age groups,
each choosing to bid different amounts of
money across the Beehive platform.
Since Beehive’s launch, we’ve also
worked on developing ancillary features
like a secondary market that provides
liquidity for investors on the platform,
issues an invoice and when it receives the
actual payment.
Beehive has enhanced the process by
leveraging its powerful peer-to-peer
funding platform to link small businesses
with smart investors, offering affordable
short-term financing. Businesses will be
able to list invoices that are due within
60 to 120 days and receive financing
within 24 to 48 hours from approval at
rates starting from 0.75% per month,
dramatically below alternative means of
finance.
“The net result of this is Beehive’s promise
of win-win: businesses gain fast access
to competitive funding, while investors
gain attractive short-term returns while
diversifying their risk,” said Craig Moore,
founder and CEO of Beehive.
as well as an Invoice Financing product
enabling SMEs to boost their working
capital and improve cash flow. The later
solution also presents a great substitute
for larger investors such as funds and
asset managers to generate alternative
returns, while supporting SMEs in the
UAE economy. We are excited about the
upcoming business finance opportunities
we still have in the pipeline.
As we helped pioneer P2P to the local
market early on, we worked to help educate
the market about peer-to-peer and how
Beehive can help. Getting the message
across about the benefits of P2P finance
to a wider audience has been essential to
driving adoption and comfort with the P2P
concept.
As the P2P finance industry turns 10
years old this month, it still remains a
burgeoning industry. But there is general
consensus that P2P finance platforms are
bridging a gap, enabling smaller businesses
and ordinary people to seek finance and
invest more easily. Today, significant
investments and big players are looking
to enter the market and participate on the
fast expanding P2P finance sector, with
several established financial institutions
vying to embrace its promise of greater
efficiency and choice.
41
MARKETS REWIND | Amazon
The Virtual
Phenomenon
Amazon.com continues to grow and evolve as a world-class
e-commerce platform. Here’s why
A
mazon.com is a Fortune 500
company based in Seattle, that
opened on the World Wide Web
in July 1995 and today serves as a
virtual hyper market for online customers
and sells products ranging from books,
tablets and eBooks; computers, mobiles,
cameras, personal and healthcare
appliances and devices, specialty foods,
fashion jewelry, car, motorbikes, parts and
accessories, to name a few.
Humble Beginnings
In 1994, a 29-year-old financial analyst
and fund manager named Jeff Bezos was
fascinated by the rapid growth of the
Internet. In order to capitalize on the hot
new marketing tool, he made a list of 20
products that might sell well on the Internet
and found, after some intense analysis that
books topped of that list. Although Bezos
liked the name Abracadabra, he decided to
call his online bookshop Amazon.com.
Amazon was initially started by the name
Abracadabra in 1994 by Jeff Bezos and
went online as amazon.com in 1995. Today,
amazon is the largest online retailer on the
planet. The company’s name Amazon has
truly become as big as the Amazon River
from which it took inspiration.
42
Turning Point
When he started, Bezos had no experience
in the book-selling business, but he
realized that books had an ideal shipping
profile for online sales. He believed that
many customers would be willing to
buy books without inspecting them in
person and that books could be impulse
purchase items if properly promoted on
a site. By accepting orders on its web site,
Bezos believed that Amazon.com could
reduce transaction costs in the sales to the
customer.
He decided to locate his firm in Seattle,
close to a large pool of programming
talent and near one of the largest book
distribution warehouses in the world. These
supply factors were important because
Bezos wanted to develop efficiencies
that would allow Amazon.com to reduce
transaction costs for its purchases as well
as its sales transactions.
By paying attention to every process
involved in buying, promoting, selling, and
shipping consumer goods, and by working
to improve process continually Bezos
and Amazon.com have become the first
highly visible success stories in electronic
commerce.
Logistics Superiority
The ability to offer shopping convenience,
ease of purchase, speed, a wide selection,
discounted pricing, and reliability of
order fulfillment are all tied directly to
the company’s logistical competencies.
By purchasing large volumes of products
directly from publishers the company
offers a wide selection to customers and
receives great discounts from suppliers.
Amazon.com aims to ship 95% of products
on the day they are ordered. Direct model
enables Amazon.com to shorten shipping
times. The company invested also heavily
in warehousing and material handling
systems to achieve multifold improvement
in throughput.
E-Commerce Platform
In 2000, Amazon.com began to offer its
best-of-breed e-commerce platform to
other retailers and to individual sellers.
Today, more than two million small
businesses, world-class retail brands and
individual sellers increase their sales and
reach new customers by leveraging the
power of the Amazon.com e-commerce
platform. Through programs such as
Selling on Amazon, Fulfillment by Amazon,
Amazon Webstore, Checkout by Amazon,
Product Ads and Advantage, sellers of all
shapes and sizes offer their selection to
Amazon.com customers by using various
components of the e-commerce platform.
Performance Metrics
The Annual Report 2014 of Amazon says
that it employed approximately 117,300
full-time and part-time employees as of
December 31, 2013. The Amazon Appstore
now serves customers in almost 200
countries. Selection has grown to include
over 200,000 apps and games from top
developers around the globe – nearly
tripling in size over 2012. Amazon is
expanding its geographic footprint. It now
has 10 Amazon Web Services around the
world. Net sales increased by 20% to $88.99
billion, compared with $74.45 billion in
2013. Operating income was $178 million,
compared with operating income of $745
million in 2013.
Last year, Amazon introduced Prime
Now, a one-hour delivery on tens of
thousands of daily essentials exclusively for
Prime Members. It announced Best-Selling
Books of 2014 and unveiled ‘Make an Offer’
for customers to negotiate lower Prices.
Amazon.com continues to remain
a customer-centric company where
consumers can find and discover virtually
anything they want to buy online. By giving
customers more of what they want — low
prices, vast selection, and convenience —
Amazon.com continues to grow and evolve
as a world-class e-commerce platform.
www.wealth-monitor.com | April 2015
WHAT’S HOT
US Equities Power Ahead
The global equity markets are the flavor of the
season led by the US
the world are not very optimistic regarding
stock market performance this year.
However, the likelihood of rate hikes by
the US Federal Reserve this year raises
a number of questions of its impact on
various asset classes.
Given this background, Manickam
Ravindran tries to simplify the investment
scenario and identify which sectors/asset
classes are expected by analysts to perform
relatively better than the others.
T
he global economic recovery process
is still struggling to gain momentum.
As per World Bank’s estimates, global
growth is expected to rise moderately to
3 percent in 2015, and average about 3.3
percent through 2017. “Growth in major
economies has increasingly diverged, as
the recovery in the US and the UK gains
momentum but the Euro Area and Japan
lag behind,” the Bank noted in a report.
In Europe, concerns over Greece’s ability
to meet its debt repayments commitment
continue. Growth pace in China is slowing
down. Weak commodity and energy prices
continue to weigh on energy-dependent
countries such as Russia, Brazil and
Mexico. Metals, such as copper and steel,
don’t present a rosier picture either. Gold
however, is continuing to hold on.
In the GCC (Gulf Cooperation Council)
the market sentiment looks cautious for
2015. With the crude oil price hovering
low and fears over a deepening of global
slowdown heightening, investors across
April 2015 | www.wealth-monitor.com
Equity Is The Name Of The Game
The global equity markets are the flavor
of the season led by the US. Weaker
commodity prices and stronger dollar
augur well for the US stock markets and
a healthy US economy will boost sales
and earnings across diverse industrial
segments. The equity market is bullish
and the trend is likely to continue more
vigorously in H2, 2015.
In the Eurozone, investors are left with
no alternative than to invest in equity
In the GCC the market
sentiment looks cautious
for 2015
market as policy interest rates and bond
yields are near record lows in euro zones.
In India, the recent budget has given the
required boost to corporates in India and
the business conditions are improving
fuelled by the pickup in economic growth
and the equity markets are very buoyant.
Japan equity markets will react positively
to Bank of Japan’s 2% inflation target
which is likely to bolster the country’s
investor expectations from falling asset
prices to rising asset prices.
Chinese equity markets will show an
uptrend and stands to gain on weaker
commodity and oil prices, as china’s
growth engine is supported by commodity
imports. The reform programme in
China is key to rebalancing its economy
towards consumption and away from
investment and has given confidence to
the sentiments of the investors.
US Bond Yields Are Set To Rise
The US Treasury yields are expected to
rise, particularly at the short end of the
yield-maturity curve as the Fed will start
interest rate normalization from mid-2015.
Several segments of the US bond markets,
such as credits, treasury bonds, and highyield corporates are likely to experience an
upswing in returns. The potential for a rise
in the yield (and spreads) is much larger for
high-yield corporate bonds than for other
higher-quality segments of the US fixed
income market. There could be capital
flows into the bond market.
Renewed Interest In Real Estate
Investments In US
Core real estate especially office buildings
and multi-family dwellings witness
renewed interest from investors. Inflows
from investors on real estate are going up
in 2015. By the end of 2015, Millennials
(those under the age of 35) will overtake
Gen X (35-50 years old) to become the
largest group of homebuyers in the US,
according to industry experts.
43
WHAT’S NOT
Pressure on EM Currencies
Soybean and maize prices may head
downwards too
EM Currencies May Face Headwinds
As US dollar gains strength at the expense
of many major currencies, the debt
segment in the emerging markets are
going to face a problem of a different kind.
As per BIS data (2014), between 2009 and
2013, non-financial corporate borrowers
in Emerging Markets increased foreign
indebtedness by $650 billion, often to
fund domestic operations. As the value of
US dollar liabilities rise relative to home
currency, the burden of servicing the debt
increases. This negative shock to balance
sheets trigger domestic rate increases to
defend the currency.
W hat ’ s
44
not
As the value of US dollar
liabilities rise relative
to home currency, the
burden of servicing
the debt increases.
This negative shock to
balance sheets trigger
domestic rate increases
to defend the currency
concerns about dryness in South America
and firmness of the US dollar worked
in favor of bearish market. Favorable
conditions in Brazil might provide comfort.
Maize
Maize prices may head southwards in Q1,
2015. Though maize production in 2014 is
expected to exceed the 2013 record with a
sharp increase in the EU, South Africa and
the US which would more than offset a
decline in China and the CIS. The utilization
in 2014-15 set to increase by 2.8 percent as
competitive prices might boost global feed
use of maize. China has tapered off the
imports of maize that pushed the volume
and value down in world trade.
The crop prospects are generally
favorable in Brazil and Argentina, South
Africa, Mexico and India. Export quotations
were weaker during January 2015, on a
comfortable outlook for world supplies,
including mostly favorable crop prospects
in South America. Downward pressure
on prices emanated from the US about
future demand for maize-based ethanol
production.
Soybean
The soybean prices face downward price
risk in the short-term. Soybean production
in 2014-15 was revised upwards on good
harvest prospects in Brazil. Utilization is
likely to go up and competitive prices will
boost demand. Trade in 2014-15 is raised
by 2.9 million tons on higher demand by
China. Buying interest from China and
www.wealth-monitor.com | April 2015
MASTERING THE MARKETS | Short Selling
No Shortcuts
Short Selling or shorting has often been a bad word for its critics as it essentially works
on sell-high, buy-low principle and triggering market volatility. However, it has its own
advantages and is critical for the overall market development. In the UAE short selling
is allowed in a much regulated manner
Short selling – the sale of a security
that the seller does not own – is one of
the market practices in many securities
market around the world. In the UAE, the
market regulator Emirates Securities and
Commodities Authority (SCA) defines
short selling as “the sale of borrowed
securities or securities not owned by
the seller” and reserved the practice
for market makers, in addition to other
cases approved by SCA.
The regulator in December last year
stated that, “The technical regulations
and trading mechanisms of the UAE
financial markets do not permit, or
support, short-selling practices up to
this point, unless done in accordance
with the SCA Board Decision No (48)
concerning the Regulations as to ShortSelling of Securities.”
The Mechanics
The concept of short-selling can take
any one of the following forms in UAE:
The selling of borrowed securities in
the hope of repurchasing them in the
future at a lower price and returning
them back to the lender at settlement
date
The selling of securities not owned
by the seller, buying them back from
the market—by delivery date—and
delivering them to the buyer,
Borrowing them from another and
delivering them to the buyer and then
purchasing them for the lender.
Short selling is undertaken to generate
profit from the difference in the
purchase price and the selling price
as short sellers expect a drop in the
price of shares after the selling, and
subsequently repurchase them for
April 2015 | www.wealth-monitor.com
less than the selling price. However, if
the price of shares in question surge
contrary to sellers’ expectation, short
sellers would incur losses.
ability to deliver the securities which he
wants to short-sell by the settlement
date. The broker is not to provide a
total or partial guarantee for securities
borrowed by his client to settle a shortselling transaction.
Besides, the broker is not to short-sell
securities unless the price of the order is
higher than the price of the last executed
transaction. Additionally, short selling
is not to be used in order to prejudice
the fairness and integrity of the market.
And lastly, securities short selling orders
must be entered at a specific price.
Summing up, the votaries of short
selling consider it as a desirable and an
essential feature of a securities market.
The critics of short selling on the other
hand are convinced that short selling,
directly or indirectly, poses potential
risks and can easily destabilise the
market.
Highly Regulated
The SCA has clearly stated that
regulated short-selling practices are
only reserved for market makers, and
that it has not issued approvals to any
local bodies to practice short-selling.
The securities market determines the
securities that are allowed for short
selling in accordance with the standards
set by the market and approved by the
regulator. Securities may only be shortsold after one month from listing in the
market. Short selling may not be used
for a security that is subject to the rights
of subscription in capital increase shares
or in covered warrants.
The SCA may temporarily
or permanently suspend
short selling for some or
How short-selling works ?
all securities in the event of
exceptional circumstances
Profit = Sale price minus
that may be detrimental to
purchase price
the market, such as sharp
Step 3: Later, the investor buys
Step 1: An investor
fluctuations in the prices.
shares back when the
borrows stock A from
price
falls from X to replace the
Short selling will be be
a broker
borrowed shares
stopped on the same day
and the next business day
Step 2: Sells stock A to
for securities that fall 5%
Step 4: Returns stock A
another buyer at price
to the broker
x hoping for further fall in
or more in one trading day
price
and no more than (10%)
of the closing price of the
previous day.
Dealers’ Obligations
As per the regulations, the
broker can execute short
selling transactions only
after ensuring his client’s
45
TECHNOLOGY TRENDZ | Mobile Wallet
The Future
Is Here
Mobile Wallet is gaining traction the world over. Manickam
Ravindran analyses what potential it holds for the overall
e-commerce sector in the UAE
T
46
here is a growing recognition among
the retail community across the
world that mobile wallets are going
to be central to future e-tailing. Mobile
wallet is a system that allows consumers to
pay by phone from any location, anytime.
Mobile Wallet is a service that enables
payment transactions of customers and
help customers to manage digitized
valuables of shopping viz offers, coupons,
loyalty rewards, tickets, gift cards, IDs,
electronic receipts or product information.
Mobile wallet can be used for conducting
banking transactions, making payments at
point of sales (POS) terminals, maintaining
and monitoring budgets and personal
finance, linking multiple credit and debit
cards, among others. Mobile wallet
supports multiple channels for access such
as interactive voice response, SMS, Smart
App, and near-field communication (NFC).
Key players in the global mobile wallet
market include American Express Inc.,
Apple Inc., BlackBerry, First Data, Google,
MasterCard, PayPal Inc., Samsung and Visa
Inc.
Where To From Here
According to a study by Grandview
Research, rising smartphone penetration,
advancement of 3G and 4G networks and
exponential growth of mobile internet
applications are expected to drive mobile
wallet market in future. The advent of NFC
(Near Field Communication) technology
and its integration across mobile devices as
well as in POS terminals is also expected to
fuel mobile wallet market growth over the
next few years.
An electronic wallet
allows integration of
multiple tickets, coupons
and cards, thus reducing
the hassle of carrying
multiple cards
Application Insights
Mobile wallet applications cover retail,
vending machines, public transportation,
grocery stores and restaurants. These
applications help a consumer evaluate
products and check prices with integrated
comparison shopping capabilities, thus
simplifying the process of determining
which merchant offers the best deal on a
service or a product.
Mobile wallet market for retail
applications is expected to witness
significant gains owing to several initiatives
undertaken to equip retail stores with POS
devices and easy payment options using
smartphones. It also organizes and stores
customer receipts for any transactions at a
retailer.
MasterCard and Visa have taken initiatives
to encourage retailers in installing NFC
POS payment terminal readers that accept
NFC, standard magnetic stripe swipes and
new chip-based cards, which is expected
to spur mobile wallet market demand.
Mobile wallets are also used extensively
across public transportation. It enables
consumers to buy and store a ticket for
ferry, rail, bus, air and other forms of public
transportation.
Initiatives in UAE
Last year, the United Arab Emirates Banks
Federation announced the launch of a
Mobile Wallet project. The project is part
of the UAE’s Smart Government initiative,
which has identified over 90 services
provided by government departments
www.wealth-monitor.com | April 2015
TECHNOLOGY TRENDZ | Mobile Wallet
requiring payments. The Mobile Wallet
project also incorporates the facility for
smart phones to be used for cashless
payments at merchants and retailers in the
UAE. The Mobile Wallet services is expected
to be offered through mobile applications
by this year. Apart from the UAE, mobile
wallet initiatives have gained momentum
all over the world, with varying levels of
success.
The UAE enjoys the distinction of
having one of the highest mobile phone
densities in the world at nearly 193%,
while smartphone penetration is around
78%. However, cash transactions are the
preferred choice of most shoppers and
retailers. According to a MasterCard study,
an estimated 8% of consumer payment
transactions are done using non-cash
methods in the UAE. Cashless payments
are expected to gain traction largely due to
governmental initiatives such as the Smart
Government initiative.
Contactless
Payment
and streamlined, and contactless for both
parties.
Shezan Amiji, co-founder
and Managing Director,
Beam Wallet, tells Wealth
Monitor how innovations in
m-commerce are shaping
consumers’ shopping
experience in the UAE
Shoppers in the UAE can now choose
from among a number of payment
options. The latest being the contactless
payment method introduced recently
by the UAE-based mobile commerce
and rewards platform, Beam Wallet. It is
the first company in the MENA region to
introduce Bluetooth Low Energy (BLE)
Beacon technology, enabling consumers
to shop, earn and redeem rewards while
enjoying specifically targeted offers and
promotions, without cash or cards.
This technology offers retailers
immediate engagement with their
customers by sending a passive alert to
the retailer’s point of sale (POS) system
notifying of the customer’s presence in
store. The consumer receives a personalised
notification through their Beam Wallet
app, welcoming them and highlighting
dedicated offers and immediate rewards
available. Payment transactions are simple
April 2015 | www.wealth-monitor.com
Adoption Issues
Many mobile wallet initiatives have failed
due to low adaption rates and usage, as it
turns out that the convenience of replacing
a physical wallet with a mobile payment
service might not add enough value to
achieve high adoption rates. If consumers
don’t see significant advantages in using
Shezan Amiji, co-founder and Managing
Director, talks to Wealth Monitor about
mobile commerce in the region and much
more…
How Beam Wallet is different from other
mobile payment apps?
Beam Wallet’s mobile commerce platform
is both unique and innovative – there is
nothing available anywhere in the world
that enables consumers to shop, earn
and redeem rewards, and enjoy exclusive
special offers and promotions within a
single, easy to use App. As opposed to
many mobile payment propositions in
the market today, Beam offers a solution
that is completely agnostic in terms of
smartphone devices, operating systems,
financial institutions, telecom operators, or
retailers.
Beam Wallet is a home-grown company.
Which other countries you’re planning
to expand in the near future?
We will be rolling out initially across the
GCC and MENA, but we are also looking at
countries outside the region, with Sweden
and Australia both at advanced stages of
planning.
How has been the response of retailers
and consumers towards Beam Wallet so
far?
With mobile technologies at the centre of
today’s consumer’s shopping experience,
Beam Wallet came to market with a
unique value proposition for retailers
the mobile wallet over cash or a credit card,
or if they have any security concerns, they
might be reluctant to change their existing
habits.
One of the problems currently faced by
consumers is power and battery backup.
When the battery of the mobile is down,
the mobile wallet cannot be used. This is
one of the key restraints for the growth of
the market. Smartphone users normally
have multiple applications on their phones
which consume power and the chances of
battery outages are high. This limits the
usability of the mobile wallet application.
and consumers. Offering shoppers
convenience, security, and a completely
contactless payment solution via their
smartphones, Beam Wallet’s unique
proposition has already secured over 1,200
retailers and more than 100,000 active
users in the UAE alone. Big name retailers
include Aeropostale, Aldo, Chili’s, Cold
Stone Creamery, Costa Coffee, jones the
grocer, Kenneth Cole, Shakespeare and Co.,
Subway, Tim Horton’s, Tommy Hilfiger and
Yo! Sushi, with numbers set to double in
the next six month, after recent partnership
agreements between Beam Wallet, retail
giant Majid Al Futtaim Ventures and telco
operator du.
We believe that innovation is led by
consumer behaviour, and will continue
to work on optimizing our platform,
forging strategic partnerships that add
value to the Beam Wallet offering, and
making the shopping experience even
more convenient and relevant for both
consumers and retailers.
47
Shezan Amiji, co-founder and
Managing Director, Beam Wallet
DASHBOARD
DASHBOARD
2015
The Dashboard section gives insight into a whole lot of regional and global financial transactions
including, but not limited to, IPOs, M&As, private equity & venture capital deals, Sukuk issuance,
crowdfunding deals, investment patterns, sovereign wealth fund deals, among others. In this
issue, Wealth Monitor gives a summary of IPOs, M&As and Private Equity transactions in the MENA
region, based on the data by Preqin’s Fund Manager Profiles online service and EY’s update on
MENA mergers and acquisitions, 2014 annual review.
IPOs P.49
Buzz On The Street
M&As P.50
Big Deals
48
48
Private Equity P.52
In Action
www.wealth-monitor.com | April 2015
DASHBOARD | IPO
Buzz On The Street
IPO Activity in Q4
2014 was highest
since 2008
2008
$11.5b
27 IPOs
2014
2013
$3.1b
26 IPOs
Last year, regional announced IPO activity in the MENA region was valued at $11.5b
compared with $3.1b in 2013. There were 27 IPOs in 2014 and 26 in the previous year.
The IPO activity in Q4 2014 was highest, in terms of capital raised, since 2008, largely
due to National Commercial Bank’s (NCB) record IPO of $6.0b (the largest MENA IPO
in history).
1,283.8
1,104.8
1,671.2
7,426.3
1,621.0
482.6
150.7
726.2
82.8
1,297.1
252.3
339.8
24.1
374.8
218.9
226.1
427.6
775.4
177
1,366.8
83.6
1,023.8
948.3
91.6
4,068.2
4,969.8
4,104.7
22.4
25
20
20
16
2
6
3
2
4
4
5
6
1
3
7
2
8
5
3
10
5
0
No. of IPOs
8
Q1-14
Q2-14
Q3-14
Q4-14
8
Q3-13
Q4-13
7
15
11
9
Q1-13
Q2-13
2
April 2015 | www.wealth-monitor.com
Source: EY’s MENA M&A update
5
Q1-12
Q2-12
Q3-12
Q4-12
3
5
Q1-11
Q2-11
Q3-11
Q4-11
6
Q1-10
Q2-10
Q3-10
Q4-10
15
Q1-09
Q2-09
Q3-09
Q4-09
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Q1-08
Q2-08
Q3-08
Q4-08
Value of IPOs (US$m)
MENA IPO: quarterly trends (2008–2014)
49
49
DASHBOARD | M&A
Big Deals
The announced M&A deals in the MENA region rose by 6% in 2014 to 468 deals from 442 deals in 2013 on the back of strong
market fundamentals. However, the announced deal value decreased from $50.7b in 2013 to $44.9b in 2014, down 11%, as per
EY’s MENA M&A update.
42.2
Announced MENA M&A activity: quarterly trends
12.0
8.5
Q3-14
8.2
Q2-14
16.2
8.0
Q1-14
11.2
Q4-13
9.9
7.3
107
109
Q4-14
98
Q3-13
93
Q2-13
96
Q1-13
98
Q4-12
Q3-11
4.4
Q2-11
Q3-10
Q2-10
Q1-10
Q3-09
97
Q4-09
95
5.8
5.0
7.2
17.5
14.1
13.3
Q3-12
6.5
7.1
Q2-09
Q1-09
Q4-08
Q3-08
Q2-08
No. of deals
Q1-08
5.9
9.9
Q2-12
12.1
14.3
14.1
Q1-12
15.6
Q4-11
15.8
Q1-11
18.4
15.6
Q4-10
Deal value (US$b)
26.0
54
70
91
137
77
69
103
101
92
129
134
89
93
104
119
121
125
140
150
152
The M&A activity in Q4 2014 was the highest, in terms of deal count, since 2011. The domestic announced deal activity value
decreased by 31% in 2014 compared with 2013.
Target company, country
Dafiti; Lamoda; Zalora; Namshi;
Jabong, UAE
Economic Zones World, UAE
Royal Dutch Shell (Downstream
Assets in Australia), Australia
Brookfield Property Partners,
Canada
Travelex UK Limited, UK
Heritage Oil, UK
IBM - chip manufacturing, US
50
Top 11 announced deals by value in 2014: MENA (in $m)
Orascom Telecom Algerie, Algeria
Acquirer company, country
Global Fashion Group, Luxembourg
Inbound
Fonds National d'Investissement, Algeria
Domestic
DP World Limited, UAE
Domestic
Vitol Holding B.V.; Abu Dhabi Investment Council, UAE
Qatar Investment Authority, Qatar
Outbound
Outbound
Al Mirqab, Qatar
Outbound
Global Foundries, UAE
Outbound
Kuwait Foreign Petroleum Exploration Company
K.S.C., Kuwait
Centurion Investment Co, UAE
Qatar Petroleum International, Qatar
Outbound
2,643
2,600
2,600
1,800
Outbound
BRS Ventures & Holdings Limited, UAE
3,531
1,682
1,534
1,500
1,135
Domestic
1,000
Outbound
1,000
Royal Dutch Shell (Wheatstone
LNG Project, Australia), Australia
UAE Exchange Centre, UAE
Parque das Conchas(Block BC-10)
Brazil
www.wealth-monitor.com | April 2015
DASHBOARD | M&A
Similarly the inbound announced deal value showed a decrease of 24% from $9.7b in 2013 to $7.4b in 2014. The outbound announced
deal value increased by 19% from $18.5b in 2013 to $22.0b in 2014.
Announced outbound deals from MENA: 2014 sector focus
Deal value (US$m)
No. of deals
Real Estate
(includes hospitality & leisure)
(3,809.6 )
Other sectors
61
Technology 11
Technology
(2,487.1 )
Other sectors
(5,166.3 )
Diversified
Asset Management
Industrial Products
4
11
Consumer Products
14
Asset Management
(2,147.0)
Oil & Gas
(7,130.7 )
Consumer Products
(877.8 )
Diversified
Industrial Products
(430.6)
Oil & Gas
16
Real Estate
(includes hospitality & leisure)
26
Announced inbound deals into MENA: 2014 sector focus
No. of deals
Deal value (US$m)
Banking & Capital Markets
(341.5)
Other sectors
(536.0)
Banking & Capital Markets
3
Other sectors
39
Power & Utilities
4
Power & Utilities
(508.0)
Diversified
Industrial Products
8
Diversified
Industrial Products
(357.7 )
Technology
(3,551.0 )
Consumer Products
(826.5 )
Technology
9
Consumer Products
13
Oil & Gas
14
Source: EY’s MENA M&A update
Oil & Gas
(1,259.4 )
April 2015 | www.wealth-monitor.com
51
DASHBOARD | Private Equity
In Action
According to Preqin’s Fund Manager
Profiles online service, there are 108
private equity firms headquartered in
the Middle East, and over the past decade
they have raised $14bn in aggregate
capital commitments. Unsurprisingly,
Dubai emerges as a hot spot, with over
a third of these firms (35%) based in the
emirate and fundraising data showing
that this city alone accounts for 22% of
the total capital accumulated for the
Middle East.
The GP (General Partner) to have raised
the most private equity capital over the
past decade, however, is headquartered
in Kuwait: Global Investment House,
which has $2.7bn in aggregate capital
commitments. As a buyout firm, it is
industry-agnostic and closed its last
vehicle, Global Buyout Fund, in 2008
on $680mn. Together with Global
Investment House, Gulf Capital and
Swicorp rank as the top three Middle
East-based private equity firms, by funds
raised in the last 10 years.
Analysis by geographical preferences
reveals that only a select few of the 108
firms seek investments outside of the
Middle East, investing in continents
such as Asia and North America. This
means that most of the capital raised
remains within the region, with many
looking to capitalize on the rich natural
resources available in the Middle East,
specifically investing into private equity
opportunities in the energy and oil &
gas sectors.
52
Increased government spending in
recent times will prime the Middle
Eastern economy with attractive
investment
opportunities,
and
potentially pique the interest of GPs
and LPs (Limited Partners) around the
world. However, concerns over political
instability and slowing economic
growth, particularly in juxtaposition
with its East Asian counterparts, may
well hinder the region’s ability to secure
capital from potentially wary investors.
Sovereign Wealth Fund (SWF) and Private Equity (PE) monthly activity: 2014
MENA SWF/PE deals: monthly deal summary (2014)
January
(105.2)
5
February
(2,653.2)
December
(2,404.5)
5
18
March
(218.7)
6
April
(1,299.9)
10
November
(1,865.1 )
11
7
October
(858.0 )
September
(491.3 )
May
(1,807.0 )
July (30.0)
August (10.9)
June(n/a)
5
10
7
1
5
Deal value (US$m)
Number of Deals
90 SWF/PE deals amounted $11.7b of the total disclosed
announced value in 2014.
SWF/PE deal activity: target sector focus in 2014
30
16
13
11
10
6
2
2
2,940.9
3,100.0
Oil & Gas
1,733.5
1,215.7
963.0
703.0
554.5
533.0
Other sectors
Real Estate
(includes hospitality
Technology
Consumer Products
& leisure)
Construction
Asset Management
Prof Firms & Services
Deal value (US$m)
Number
of Deals
www.wealth-monitor.com | April
2015
DASHBOARD | Private Equity
Totes Isotoner Corporation, US
TOP ELEVEN SWF/PE DEALS IN 2014
Investcorp; Freeman Spogli & Co, Bahrain
Royal Dutch Shell Plc (Downstream Assets in Australia), Australia
Vitol Holding B.V.; Abu Dhabi Investment Council, UAE
State Tower Namsan, South Korea
Abu Dhabi Investment Authority, UAE
Brookfield Property Partners, Canada
Qatar Investment Authority, Qatar
Hepsiburada, Turkey
Travelex UK Limited, UK
Abraaj Group, UAE
BRS Ventures & Holdings Limited, UAE
Gems Education, UAE
A consortium led by Fajr Capital Limited, UAE
PRO Unlimited, US
Arabtec Holding, UAE
Investcorp; Bahrain Mumtalakat Holding Company, Bahrain
Aabar Investments PJSC, UAE
Global Environmental Management Services, Saudi Arabia
National Petroleum Services, Qatar
Fajr Capital Limited; Jadwa Waste Management Opportunities Fund, Saudi Arabia
A consortium led by Fajr Capital Limited, UAE
Target company, country
Acquirer company, country
Number and Aggregate Deal Value of Private Equity-Backed
Deals in Middle East Region, 2006 - 2015 YTD (as at 23.02.2015)
SWF/PE deal activity: target country focus in 2014
50
1716.5
Other countries
(2,053.0 )
26
U.K
(1,682.0 )
945.0
89.5
8
Australia
(2,600.0 ) 1
UAE
(1,662.3 )
Canada
(1,800.0 )
17
1
Number of Deals
Aggregate Deal Value ($mn)
April 2015 | www.wealth-monitor.com
2014
2015
2015
2013
2012
2011
3
2010
2009
2008
United States
(1,146.5 )
2
20
54.3
295.0
111.6
2007
167.9
10
20
364.6
13
795.9
19
2006
24
22
22
Source: EY’s MENA M&A update except indicated otherwise
In the private equity space in the MENA region, of the 468 announced M&A deals in 2014, 90
(19%) were SWF/PE deals, with December 2014 having the most activity of 18 deals followed by
November with 11 deals, according to the ‘EY MENA M&A update’ 2015.
SOURCE: PREQIN
7
Saudi Arabia
(300.0 )
No. of Deals
Qatar
(500.0 )
53
4
Deal value (US$m)
DASHBOARD | Investment
AIM 2015 to Highlight Importance of
Industrial Investments Globally
According to the UAE Ministry of Economy, the UAE’s GDP is now less
reliant on oil, thanks to diversification and higher investment inflows
The UAE Ministry of Economy, the
organizing body of the Annual Investment
Meeting (AIM), has announced that the
industrial investments would be one of
the key topics at the 2015 edition to be
held from March 29 to April 1, at the Dubai
International Convention and Exhibition
Centre under the patronage of HH Sheikh
Mohammed bin Rashid Al Maktoum, Vice
President and Prime Minister of the UAE,
and Ruler of Dubai.
H.E. Abdulla Al Saleh, Undersecretary,
UAE Ministry of Economy, Foreign Trade
Sector said: “Industrial investment holds
high importance in this year’s AIM
agenda, as it is considered a key pillar that
contributes significantly to the GDP of
developed economies.”
H.E. Al Saleh said that UAE’s GDP is less
dependent on oil due to diversification
of revenue sources and higher inflow of
investment, with the industrial sector
increasingly becoming a major contributor
to the GDP as a result of attracting industrial
investments.
Mr. Dawood Al Shezawi, CEO, AIM’s
Organizing Committee, said that AIM
would discuss in depth industrial
investment and challenges facing it, given
its global economic significance. He added
that industrial development has acquired
high importance in all markets, including
emerging ones.
The industrial sector generates a large
number of jobs, which is an important
aspect that calls for boosting of various
kinds of industrial investments in
developing countries and emerging
markets.
“Industrial investment triggers high
interest among investors, because it is
considered a magnet for capital and
April 2015 | www.wealth-monitor.com
brings innovative products, especially in
technology, energy, renewable energy
agriculture and other industries,” added H.E.
Al Saleh.
“Emirates Global Aluminium (EGA) is a
Strategic Partner of AIM 2015. It is a giant
industrial entity and global leader in the
production of aluminum. It represents the
ideal industrial model, being one of the
largest aluminum companies in the world,”
said Al Shezawi.
EGA is a 50/50 joint venture company
of Mubadala Development Company of
Abu Dhabi and Investment Corporation of
Dubai. This merger came into effect in 2013,
creating the 5th largest global producer of
aluminum. EGA has an aggregate enterprise
value of more than USD 15 billion (55 billion
AED).
AIM 2015 will be focused on the topics of
diverse options and policies for innovation
and technology transfer through Foreign
Direct Investment (FDI). It will also discuss
enabling regulatory frameworks for host
countries to encourage innovation and
technology transfer, in addition to raising
the topic of developing high-end industries,
and the underlying factors behind Asia’s
successful case studies. The forum will also
discuss investment in mining as well as
companies’ strategies and FDI factors to
develop high end industries.
“In-depth discussions on industrial
investments will be held during AIM, with a
focus on obstacles and challenges, with the
goal of accelerating inflow of industrial FDI
among participating countries,” Al Shezawi
added.
Industrial investment faces numerous
legal and legislative obstacles. Investors
and host countries need to come together
to examine ways to attract investments
and develop legislative and legal-oriented
industrial investment framework, including
intellectual property rights and technology
transfer, etc. This is another topic of
discussion that will dominate AIM this year,
addressed by leading specialists, officials
and experts.
Obstacles
also
include
creating
appropriate infrastructure to host industrial
investments, especially in the case of heavy
industries, which require availability of
electricity, communications, transportation
and logistics.
This year’s AIM will be held under the
theme ‘Sustainable Development through
FDI Induced Innovation and Technology
Transfer’.
Innovation is considered one of the
main pillars of the industrial sector, as
industrial revolution is the direct result of
innovation. Technology transfer is another
key requirement for industrial sector FDI,
as the foreign investors transfer advanced
industrial technologies to the host country,
and develop it and as well as train the staff
on it.
Experts, officials and investors will
discuss the topic of technology transfer at
AIM 2015, and throw light on its current
status and challenges and its benefits. AIM
will also highlight the key technologies that
host countries look forward to acquire.
Middle East and Arab countries in general
are still in need of more investment in the
industrial sector. Those countries have a
strong labor force as well as plenty of raw
materials and industrial resources. However,
they need to create ways to attract more
industrial investments which will ensure
further economic development, youth
employment and technology transfer.
55
THE LAST LAUGH | Cartoon Strip
Now no business issue or financial topic is too hard to understand. Through this comic
strip, our in-house cartoon characters Thawr (Bull), Dub (Bear) and Hakeem (Wise Man)
guide you through the maze. This issue features the dynamics of oil price.
E
H
T ND
E
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www.wealth-monitor.com | April 2015