Institutions 'good for Gulf markets'

Dubai: The new wave of institutional investors will add more depth to the regional markets and reduce the high degree of volatility created by speculators, said Henry Azzam, Deutsche Bank's CEO for Middle East and North Africa.

Speaking at the Middle East Capital Markets conference in Dubai yesterday, Azzam said many institutional investors such as private pension funds, mutual funds, hedge funds, sover-eign wealth funds and a few foreign institutional investors (FIIs) have started investing in Gulf markets.

"Most regional markets have been dominated by retail investors. With more markets opening up for foreign investors, FIIs are showing interest in the Gulf markets. The arrival of established brokerages and high quality research have reduced counter-party risks. This should attract more institutions to the Gulf markets," he said.

As part of the capital market development in the Gulf, the regional markets are in need of active debt markets with government debt instruments providing benchmarks and a yield curve based on debt instruments of various maturities.

Privatisation

The privatisation of some government companies is expected to increase liquidity on the regional stock markets.

"There is an acute shortage of assets in relation to foreign institutional demand. We hope more issues will supply quality equity to the markets," said Jeffery Culpepper, managing director and head of global markets and Investment Banking of Merrill Lynch in Middle East.

Investment bankers said DP World is just the beginning of a series of government companies that will go public in the region. "All regional governments are watching the DP World IPO closely. Its success should create a strong pipeline of IPOs from government owned companies," said Culpepper.

Institutional investors and investment bankers seek greater transparency and corporate governance in regional markets.

"While short supply of quality assets is a problem, fundamental issues such as standardisation and simplification of regulation and transparency must be addressed," said Christian Mouchbahani, CEO, Middle East and North Africa of Jefferies.