Wonderful piece in Euromoney regarding the dichotomy of opinion among international investors in the ME vis a vis the research capabilities of the region’s domestic investment banks and equity research houses, most of which have found themselves “struggling to meet their debt obligations.” While many portfolio managers still swear by local expertise, others are more skeptical, noting that research is only as valuable as the individual analyst standing behind it, and that the downturn has led to an exodus of some of the best talent.
Some other interesting points are made in the article that form the foundation of frontier investing and stand repeating:
“As businesses in the Middle East continue to move away from the family owned and operated model and place greater portions of their companies in the hands of public shareholders, a higher level of corporate transparency, scrutiny and research will be required. With increased coverage from both local and global firms, Middle Eastern equity markets will become deeper and more liquid as time goes on.”
- “Despite the recent setbacks in the region’s financial sector, [Mahdi Mattar, head of research and chief economist at the Dubai-based Shuaa Capital] still believes in the growth opportunities that the Middle East presents, ‘with valuation at discount, especially after the severe sell-off of last year, and the regional equity markets offering some highly attractive value plays'”.
- Will Manuel, head of [Central Eastern Europe, Middle East and Africa] equity research at HSBC, “says that the [ME’s] prospects are good, as equities in the GCC and Egypt become a large bloc of the global emerging market benchmark indices, such as the MSCI Emerging Markets Index. As more Middle Eastern stocks move into the emerging market benchmarks, increased trading volume in the Gulf region is bound to follow, particularly among institutional investors.”