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Wednesday, 23 July 2014

Middle East Report 2011

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The remarkable political events in the Middle East this year have made their mark on the local capital markets, but confidence in the region - both as a capital markets hub and as a deal generating region - remains.

Much of the loan business completed this year has been on a bilateral or club basis. Very few wider syndications have taken place. Why is this the case? What impact does this lack of syndication have on the market?

Bond market activity has mostly been linked to sovereign and sovereign related names, such as Dubai and International Petroleum Investment Company. However, we have also seen some financial institutions look to access the market, such as Sharjah Islamic Bank and First Gulf Bank. Diversification of currencies - away from dollars - has been more prevalent, with IPIC tapping euro and sterling markets and FGB printing in Swiss Francs. So where next for the GCC bond market?

Project finance activity in the region has been mixed. Power for power, desalination and energy project finance is growing rapidly. The Saudi market, in particular, is highly liquid but there is activity across the region. Yet, the growth of the infrastructure/PPP market has been knocked back in recent months by project cancellations. What is driving the project finance market - which has been so important in developing the local infrastructure?

The local stock markets continue to evolve. What new products are they moving into? Do they need to offer secondary bond trading, short selling etc? Will all exchanges look to move towards gaining MSCI emerging market status? Many GCC companies are looking to London for a stock exchange listing - both for primary listings and for secondary offerings, such as Global Depositary Receipts - instead of regional markets. What can regional exchanges do to stop the flow of companies turning to London?

Following the unrest in Bahrain, what is the knock-on effect on its image as a financial centre? With the huge infrastructure boom planned as a consequence of the football World Cup, how is the Qatari banking system preparing for this? How far have Kuwaiti companies got in their restructuring process? How easy/difficult has it been, plus comparisons with Dubai?

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