Dubai likely to be next leader in Islamic economy evolution: Thomson Reuters

GULFNEWS.COM--Dubai: While there are various major centres of Islamic economy — all in Asia — Dubai could emerge as the leader in the next phase of the evolution of Sharia compliant sectors, including finance and insurance, Halal food and lifestyle, and travel, according to a summary of Thomson Reuters’ first State of the Global Islamic Economy Report 2013, which will be released on Monday at the first Global Islamic Economy 

Summit in the emirate.

Malaysia, considered to be the strongest centre of an all-round Islamic economy sector, may have reached a point of “stagnation” and so, Dubai, with a clear vision of establishing itself as the centre of a global Islamic economy, looks likely to be the one with the biggest potential, says the Report summary. The other major centres are Saudi Arabia, Turkey and Indonesia.

On October 5, His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, unveiled a strategic plan for “capital of Islamic economy” for the emirate. The plan includes seven key pillars and 46 strategic initiatives to be implemented within three years.

Long-term benefits

Sami Al Qamzi, Director General of Dubai’s Department of Economic Development and vice chairman of the Supreme Committee of the Dubai Islamic Economy, told Gulf News that the aim of Shaikh Mohammad’s initiative to make Dubai a global capital for the Islamic economy is to bring long-term benefits to the economy as a whole.

“We expect it to gather momentum over time,” Al Qamzi said. “Dubai, being a pioneer in many forward looking initiatives, is looking to capitalise on its inherent strengths to develop a new economic paradigm that would not only add value to our economy but also potentially offer solutions to global economic issues.”

Infographic

Global Islamic economy

Globally, opportunities for Islamic capital lie not just in furthering Islamic Finance, which is now well established across geographies, but also, identifying other sectors of the economy, including Halal food and lifestyle and Muslim travel, the potential of which could make the Sharia compliant economic system a competing alternative, according to the report summary.

With Muslim consumer expenditure globally on food and lifestyle sectors around $1.62 trillion (Dh5.9 trillion) in 2012 and expected to reach $2.47 trillion by 2018, the report sees that as a potential core market for the Halal food and lifestyle sectors.

Diversified economy

And Dubai emerging as a hub in Halal and lifestyle as well as Muslim tourism sectors is highly likely because of the way it has diversified its economy.

In two years Dubai could make a trusted name for itself in the Halal industry, according to Jasem Mahadik, project Manager at Al Maali Trading and Consultancy, an Islamic Finance solution provider.

Dubai’s development of a strong network of logistics facilities and services for the production of Halal products could make the emirate a global hub for this industry, he said.

“In a very short time Dubai will establish a centre for Islamic economy standard and certification which will make the emirate a reference for the issuance of global governance standards,” Mahadik added.

The major sectors of Islamic economy include Islamic finance and Insurance, Halal food, and Islamic values influenced travel, clothing, pharmaceutical/cosmetics and media recreation.

“While these Islamic economy sectors are potentially large in size, the synergistic opportunities for growth and investments are larger and could even be a necessity in true realisation of their individual visions,” the report’s author Sayd Farook, Global Head Islamic Capital Markets at Thomson Reuters said in the statement released today.

Source: http://gulfnews.com/business/markets/dubai-likely-to-be-next-leader-in-islamic-economy-evolution-thomson-reuters-1.1259266

Read More

DFSA Signs 26 Agreements With EU Regulators

Continuous collaboration with international regulators has been at the forefront of the Dubai Financial Services Authority’s (DFSA’s) engagement objective this year, and as such, the DFSA has entered into 26 supervisory co-operation agreements with European Union (EU) and European Economic Area (EEA) securities regulators. Under these agreements, each regulator agrees to help each other supervise fund managers operating across borders, between the Dubai International Financial Centre (DIFC) and Europe.

 

The DFSA negotiated the agreements with the European Securities and Markets Authority (ESMA). The DFSA’s Chief Executive Mr Ian Johnston signed the Memoranda of Understanding (MoUs) with 26 EU regulators last month. The EU signatories to these agreements are: France, UK, Netherlands, Ireland, Portugal, Spain, Italy, Luxembourg, Cyprus, Sweden, Finland, Denmark, Norway, Iceland, Liechtenstein, Hungary, Malta, Lithuania, Greece, Belgium, Bulgaria, Poland, Estonia, Latvia, Czech Republic and Romania.

 

The agreements under the MoUs allow fund managers in the DIFC to manage and market Alternative Investment Funds (AIFs) to professional investors in the EEA under the rules of the Alternative Investment Fund Managers Directive (AIFMD). AIFs include hedge funds, private equity funds and real estate funds. Managing and marketing such funds into Europe will allow DIFC-based fund managers to access a greater pool of investors. It is hoped that with a strong distribution network and a sustainable distribution model, the MoUs will prove beneficial for the industry in the DIFC.

 

Mr Ian Johnston, Chief Executive of the DFSA said: “The DFSA’s efforts to improve cross-border opportunities will further facilitate investment flows and will benefit investors and the funds industry. In addition, it reflects the DFSA’s commitment to enhance the economy of the UAE and Dubai, furthering Dubai’s position as a prominent financial centre.” 

 

The DFSA already has in place bi-lateral agreements with 13 of its European counterparts and enjoys strong and close relationships with them ensuring that fund managers are well supervised in the DIFC and in Europe.

Source: http://www.dfsa.ae/WhatsNew/DispForm.aspx?ID=258

Read More

Loan Growth, Profitability and Risk Appetite on the Rise

GULFNEWS.COM--Dubai: Loan growth in the UAE’s banking sector is picking up pace helped by the positive economic growth, improving consumer confidence and declining risk aversion and non-performing loans.

According to the The Banker’s “Top 1000 World Banks 2013” report, the UAE banking sector’s net assets have risen more than ten-fold from $49 billion (Dh180 billion) in 1995 to $509 billion in mid-2013. The UAE banking sector directly employs more than 34,400 staff as of mid-2013, more than doubling since 2000.

Financial results of the UAE banks for the first nine months of 2013 show, most banks stopped the sharp deleveraging that followed the financial crisis and the loan growth has started picking up momentum.

Large banks have reported high single digit growth in the first nine months of the year. While Emirates NBD’s customer loans as at September 30, 2013 (including Islamic financing) amounted to Dh234.4 billion, an increase of 7 per cent from the end of 2012 National Bank of Abu Dhabi’s (NBAD) loans increased 5.2 per cent to Dh182.5 billion. NBAD’s total assets in January-September period increased 14.8 per cent to Dh345.1 billion while loans increased 10.9 per cent in the same period.

“A difficult period of balance sheet repair has been completed. Banks went through a period of deleveraging and provisioning. With stronger balance sheet and sufficient liquidity in the system, the UAE’s banks are ready to increase lending,” said George T Abed, senior counsellor and director for Africa and Middle East of Institute of International Finance (IIF).

Confidence

A number of smaller banks too have reported double digit loan growth on an annualised basis. While First Gulf Bank’s loans and advances grew at a year-to-date growth of 10.7 per cent for the first 9 months of the year, Commercial Bank of Dubai reported a loan growth of 11.9 per cent.

“The banking industry is safe and secure in the UAE and the overall confidence in the UAE banks is justifiably strong,” the Governor of the UAE Central Bank, Sultan Nasser Al Suwaidi, said earlier this month.

A decline in the rate of growth of non-performing loans combined with improved liquidity and surge in lending has helped most UAE banks to improve their profitability this year.

“The banks here received strong sovereign support, which helped them to remain highly liquid during the crisis years. While capital levels remained exceptionally high during the period, improving economic activity has helped the asset quality,” said Timucin Engin, Associate Director, Ratings Analytical Financial Institutions at Standard & Poor’s.

Credit rating agency Moody’s Investors Service recently upgraded the outlook for the UAE’s banking sector to stable from negative. The outlook change reflects the continued improvements in the operating environment, as well as the ongoing recovery of the local real-estate market, which Moody’s believes will lead to a decline in non-performing loan levels and an increase in profitability over the next 12 to 18 months.

Restructurings

Moody’s expects declines in the problem loans to gross loans ratio to 8 to 9 per cent range over the outlook period, from a 10.5 per cent average at year-end 2012. While the ongoing real estate market recovery and more cautious underwriting during the downturn period are expected to lead to lower new problem loan formation. Asset quality metrics are also be supported by a reduction in the stock of problem loans due to the increasing volume of settlements, recoveries and commercial restructurings.

Rating agencies expect that the increase in net income will provide UAE banks with the internal capital generation capacity necessary to support asset growth over the outlook period, whilst maintaining their strong Tier 1 capital levels, which stood at around 16 per cent as of June 2013.

“In addition to the shock-absorption capacity provided by robust capital metrics, we also anticipate that the banking system will maintain its strong funding and liquidity profile. The cash-rich federal government and stronger Abu Dhabi-based government related entities will continue to remain a key and stable source of deposits, limiting the system’s dependence on confidence-sensitive market funding.” said Khalid Howladar Vice President — Senior Credit Officer at Moody’s

Despite the upgraded outlook, Moody’s warns that exposures to large corporate restructurings and government-related issuers (GRIs) will continue to pose asset-quality risks, particularly for Dubai-based banks.

Read More

U.A.E. Nears Debt Listing Rules to Boost Sales: Islamic Finance

BLOOMBERG.COM--The United Arab Emirates is in the final stages of creating debt issuance and listing regulations that will help develop a domestic credit market and encourage the sale of Islamic bonds, the market regulator said.

The Securities and Commodities Authority, or SCA, has circulated draft rules that for the first time treat sukuk and non-Shariah compliant debt separately. The regulator is seeking feedback from market participants by the end of the year and “hopes” to enact the regulations early in 2014, according to Obaid Al Zaabi, director of research and development at SCA.

The U.A.E., the second-biggest Arab economy, must develop local debt markets to help state-run and private companies find alternatives to bank loans, Central Bank Governor Sultan Al-Suwaidi said last month. The country is the only one in the six-nation Gulf Cooperation Council that doesn’t have a domestic, local-currency debt market.

“The new sukuk and bond regulations are built around giving more room for local issuance to be listed in local markets, instead of going abroad,” Al Zaabi, who is leading the team that developed the sukuk regulation, said by phone yesterday. “We’re opening the door for them and trying to make the regulations more durable and more feasible.”

Islamic Hub

Global issuance of Islamic bonds, which comply with the religion’s ban on interest, will climb to $60 billion next year, Moody’s Investors Service said in a report last month, up from about $51 billion in 2013. The rules will boost issuance and listing of sukuk in the U.A.E., Al Zaabi said.

“Sukuk essentially is not considered as a debt certificate, but rather a certificate of ownership,” Al Zaabi said. “The requirements, in terms of disclosure, listing, and trading, totally differ to conventional bonds. So the SCA management saw it was a good idea to make it separate.”

Dubai, one of seven sheikhdoms that make up the U.A.E. and home to the country’s second-largest stock market, announced a plan this year to become capital of the global Islamic economy. The emirate’s ambition is one of the incentives for the SCA to put the rules in place as soon as possible, Al Zaabi said.

Rival Malaysia

Dubai and the U.A.E. have a lot of catching up to do before domestic sukuk issuance rivals that ofMalaysia or Saudi Arabia. The Asian country’s issuers have sold about $168 billion, or two-thirds of all outstanding Shariah-compliant bonds, while Saudi Arabia has about $22 billion of domestic sukuk outstanding, according to Moody’s.

The U.A.E.’s debt rules will bring listing and issuance in line with best practices, Al Zaabi said. Clifford Chance LLP was appointed to develop the sukuk regulations, while Bracewell & Giuliani LLP worked on the bond rules, he said.

“The upgraded rules for both bonds and sukuk will cover all aspects of industry requirements,” Al Zaabi said. “From the application onwards there will be continuous disclosure requirements.” (Samuel Potter)

Read More

Conventional banks take on Islamic banking

ZAWYA.COM--The Islamic window is increasingly becoming an important part of UAE’s conventional banking landscape, with one of the leading lenders starting a new division early this year and others expanding on their existing offerings, thereby contributing an increased share to the overall financial fortunes of the group.

Some banks’ financial results point to the Islamic unit gathering pace.

Though a standalone Islamic bank, Emirates Islamic Bank (EIB) is very much under the conventional Emirates NBD Group umbrella and its positive contribution is starting to make a difference. EIB made a net profit of Dh115 million in the first half of this year compared to a loss of Dh90 million a year earlier.

Dubai’s biggest lender, Emirates NBD has almost doubled the contribution of the Sharia-compliant activity to its total operating income, increasing from 5.9 per cent in 2011 to 11.6 per cent in 2012.

“That’s a significant increase,” said Raghu Mandagolathur, senior vice president-research at Kuwait Financial Centre, also known as “Markaz.”

The Islamic segment’s contribution to overall revenue of Mashreq was 10 per cent in 2012, remaining constant from the previous year, according to Moinuddin Malim, chief executive of Mashreq Al Islami. Looking ahead, the bank is aspiring to increase this contribution gradually to 15 per cent by 2015.

This, Malim said, will be done “without any cannibalisation of the existing business while adding on new bank deals and customers.”

Examining overall Islamic Banking assets in the region, Mandagolathur believes that the industry is poised for a growth.

“Our research shows that Islamic banking assets in GCC is poised to grow from $445 billion in 2012 to $628.6 billion in 2016 at a compounded annual growth rate (CAGR) of 9.02 per cent,” said Mandagolathur.

That growth expectation to be witnessed in the UAE as part of GCC is the reason behind RAKBANK’s (The National Bank of Ras Al Khaimah) thrust in the Islamic segment. It is the new entrant in this space, starting RAKBANK Amal in January.

“With an anticipated surge in demand for Islamic Banking in the country over the coming years, RAKBANK wants to ensure that it is at the forefront through Amal’s competitive products and services,” said Mufaddal Khumri Idris, head of RAKBANK Amal.

Since its launch early this year, the bank’s Islamic banking portfolio has shown strong growth month on month.

“Shariah-compliant finance products today make up 30 per cent of the bank’s business, whether in terms of auto finance, credit cards, or personal finance,” said Idris. “Amal also continues to see a healthy trend in accumulating low-cost Saving and Current accounts.”

The new unit was a major contributor to its overall Dh650 million in new lending this year, said Idris.

While the competition is expected to grow fierce, it still makes sense to ramp up the Islamic side of the business with more products and services being readied for different customers.

According to Idris, Islamic business finance solutions are set to be launched by the end of September, while Ijarah products will be available to customers by year end.

In fact, some industry observers believe that the recent hiring of Peter England, the former retail head of the Malaysian lender CIMB Group as the new chief executive of RAKBANK, might indeed give a further fillip to its burgeoning Islamic business.

Regarding competition in the industry, Mandagolathur says Islamic banks or Islamic windows of conventional banks have to compete with conventional banks standalone or with Islamic windows.

“The competition will be between segments more than between banks as it is the product offering that will face competition,” he said. “Islamic segment is certainly a growth segment which all players will vie for a share. And so, it makes sense to tap that market.”

For Mashreq, historically the growth in this segment, which was launched in March 2010, has come from corporate finance, where it has offered Islamic alternate solutions to its customers for working capital finance, factoring, term financing and profit rate swaps.

“Today, we have completely revamped our Islamic retail offerings and are aggressively pushing home finance, personal loans, autos finance, SME finance,” said Malim. “Our ambition is to emulate the same market share as that of our industry.”

But it is not going to be easy.

“It is a tough task as Mashreq Al Islami is not a standalone Islamic bank but an Islamic window in a conventional bank,” said Malim.

However, he believes that with a superior product platform compared to some of the existing Islamic banks and quality service, Mashreq Al Islami could stand out from their competitors and help them accelerate their business.

In the wholesale banking arena, Mashreq Al Islami has launched Islamic alternative for Factoring, Export Finance, Call Account, etc. It has the region’s top performing Islamic Fixed Income Fund, and there are plans to shortly launch the Islamic equities funds.

On the retail side, Mashreq Al Islami have plans to launch Islamic alternative for credit card.

By Gaurav Ghose Financial Features Editor

Gulf News 2013. All rights reserved.

Read More

Islamic Trade Finance to Emerge as the Preferred Choice in Emerging Markets

EY.COM--DUBAI, 1 JUNE 2013: According to EY’s Global Islamic Banking Center, Islamic trade finance could provide new opportunities and become the preferred choice for emerging rapid growth markets (RGMs) such as Turkey, Indonesia Malaysia, Qatar, Saudi Arabia and the UAE. RGMs are emerging as hot spots for global business and they promise to permanently alter the global trade scene over the next 10 years. Many of these markets already have strong trade links with other “core” Islamic finance markets, which offer new opportunities for growth for Islamic trade finance.

Ashar Nazim, Partner, Global Islamic Banking Center of Excellence at EY says: “The increase of trade flows to the East and within emerging economies combined with growing interest in Islamic finance, means that Islamic trade finance is now a serious alternative. A constant challenge for business leade

rs is to anticipate and interpret how global trade is changing, while understanding the opportunities and risks it creates. Boards and management of Islamic banks must take note. Trade, technology, culture, labor and capital will integrate at different rates across these markets and need to be anticipated when transforming the financial institution’s trade finance operations.”

RGMs are now an increasingly significant part of the global economy. They will become an even more dominant force in global trade and as a result, businesses are going to have to adjust their strategies to reflect the increasingly regional pattern of world trade and in this context should now start to consider Islamic trade finance.

Gordon Bennie, EY’s MENA Financial Services Industry Leader, says: “Trade will grow between these markets, creating a wide range of new opportunities for them and advanced economies will also benefit, as exports to emerging markets become a rising source of growth. Middle Eastern countries are trading increasingly with other RGMs, reflecting the faster growth in demand from these countries. Banking, insurance and other financial services sectors in these countries will grow as the economies mature and the middle classes expand, offering new opportunities for trade. Demand for more sophisticated financial services is already growing rapidly as wealth levels rise.”

The degree of change in both the scale and direction of trade will have a profound impact on the competitive environment for all companies wherever they are located around the world. Trade will also be increasingly focused around Asia, the Middle East and Africa, suggesting that the key geographical location for companies will change.

Ashar adds: “It makes business sense for global organizations that operate in and trade with many of these rapid growth markets, especially those that are in the Organization of Islamic Cooperation (OIC) or have strong links to the bloc, to seriously look at Islamic trade finance.”

Challenges aheadTo compete in the market effectively, Islamic institutions will need to align their trade finance operations with global common practices. There has to be a clear understanding of how Islamic financial institutions can add value to businesses in their trade functions. Despite the high percentage of Muslim populations in emerging markets, conversion to Islamic trade finance will not be successful without a clear framework that gives businesses a good reason to switch.

Islamic institutions also need to maintain the talent pool that serves these emerging markets and ensure that talent management is an integral part of their business strategy. There is currently a shortage of staff with extensive experience in Islamic markets so this issue needs to be addressed with the industry’s rapid growth.

Islamic banks need to build international connectivity and scalable trade finance platforms that can connect with businesses and financial institutions beyond borders. This could be challenging given the small size and localized nature of most Islamic banks

“The road to Islamic trade finance is not one without obstacles. But if the correct framework is used and awareness about Shari’a compliant initiatives continues to grow, Middle East and North African markets will be able to strengthen their trade focus on the growing Muslim populations in emerging markets. These initiatives have the potential to significantly increase the value and volume of trade of these expanding markets. This is an opportunity that should not be overlooked,” concludes Ashar.

Read More

National Bonds Records AED100m Sales

ZAWYA.COM--Surge in sales achieved in just two weeks after new structure

National Bonds Corporation , a Shariah-compliant savings and investment programme, today announced bond sales of Dh100 million in the first two weeks following the launch of the new rewards structure.

Rolled out on May 1, 2013, the new rewards structure has led to an upsurge in the number of bondholders.

In the two weeks following the announcement, and with the introduction of prizes specific to female and minor bondholders, the data indicated a 160 per cent rise of female bondholders, while minor bondholders witnessed an equally noteworthy increase of 117 per cent within the same period.

Commenting on this growth, Mohammad Qasim Al Ali, CEO of National Bonds Corporation , said: "The figures reflect the achievement of the new structure in attracting a greater number of savers from our community. It also confirms the success of our newly applied approach to encourage the general public to regularly save in their means of realizing a promising future. We are confident about witnessing further growth in the number of regular savers and investors from within and outside the UAE in the near future."

Al Ali added: "In addition to doubling the rewards, the restructuring was designed with the clear objective of stimulating parents to endorse and instill the habit of regular saving to ensure that their children are securely covered for their education cost until college graduation. Also, through the newly introduced structure, we sought to increase awareness on the importance of our Mudaraba Sukuk fund among both individuals and institutions. This will undoubtedly contribute to achieving the leadership's vision of consolidating Dubai's position as the global hub of Islamic finance."

In mid-April, National Bonds Corporation announced the restructuring of its rewards program to give away attractive prizes to bondholders on a daily and weekly basis. The new structure continues the draw for the immensely popular one million dirham grand prize in the first week of each month.

It also offers two women bondholders the chance of winning a gold bar in the second week each worth Dh50,000. The third week of every month gives away two luxurious BMW cars. In addition, the new structure provides tuitions worth Dh25,000 each to two lucky minor bondholders.

Unique to the region, the new rewards structure additionally offers one cash award every minute of every day. Of the corresponding 1,440 daily cash awards valued at Dh50 each, 600 prizes are reserved for bondholders in specific sub-categories: 200 for female bondholders, 200 for minor bondholders and 200 for those bondholders who have a direct debit arrangement with their respective banks or through payroll deduction by their employers via the Employee Savings Scheme.

National Bonds , which is licensed and regulated by the UAE Central Bank, provides UAE nationals, as well as residents and non-residents with a credible and safe savings opportunity. Minors can also own National Bonds provided the bonds are purchased by the parent/guardian. Each bond costs Dh10, with a minimum purchase of Dh100.

Read More

Emirates Islamic Financial Brokerage joins Nasdaq Dubai

ZAWYA.COM---Emirates Islamic Financial Brokerage (EIFB), a major Shariah-compliant broker in the UAE, has become a member of Nasdaq Dubai, the region's international exchange.

EIFB will focus on opportunities for trading Shariah-compliant shares listed on Nasdaq Dubai, as well as other Shariah securities that become listed in due course.

Jamal bin Ghalaita, chairman of EIFB, said: "As EIFB continues to offer an expanded platform to its investor clients, our membership of Nasdaq Dubai comes as a significant addition to our rich portfolio of investment solutions. Our membership of the exchange is an important step in the continuing rapid growth of Dubai's Islamic financial services sector."

Abdul Wahed Al-Fahim, chairman of Nasdaq Dubai, said: "EIFB's arrival as a member of Nasdaq Dubai supports the exchange's drive to broaden and deepen its Islamic finance activities. The exchange is committed to innovation and expansion in all areas of Islamic capital markets, including building new links with other leading Islamic finance organizations in the UAE and overseas, as part of the overall growth of Nasdaq Dubai as the Middle East's leading international listing venue."

Hamed Ali, acting chief executive of Nasdaq Dubai, said: "We are delighted to provide new investment possibilities on our platform to EIFB and its thousands of individual and institutional clients. As economic prospects in the UAE continue to improve, we look forward to further listings of Shariah-compliant securities, including expanding the range of asset classes that we offer.

"Nasdaq Dubai will continue to build its base of Shariah investors and market participants as the exchange plays an expanding role in strengthening the Islamic economy in Dubai."

Hussein Mourad, managing director of EIFB, said: "Nasdaq Dubai's international market will offer growing Shariah investment options for the benefit of our clients in the UAE and overseas. The exchange's promotion of first class transparency and governance standards, together with its regional and international investor base, make it a highly attractive platform for our clients."

The government of Dubai announced in January that it is positioning the emirate as the capital of the Islamic economy globally in a range of areas, including capital markets.

EIFB, an arm of Emirates Islamic Bank, was the fastest growing UAE broker by trading volume in 2012 and took the number one spot on Dubai Financial Market in December 2012

Read More

Dubai Supremacy Challenged as Global Banks Move to Rivals

Skyscrapers are seen behind pedestrians in the Dubai Marina district. “Dubai’s main disadvantage is that the big money clients and markets are elsewhere,” said Farouk Soussa, chief economist for the Middle East at Citigroup Inc. in Dubai. Photographer: Gabriela Maj/Bloomberg

When Saad Iqbal left Deutsche Bank AG in Dubai two years ago as European banks scaled back amid the debt crisis, he turned to Riyadh as a construction boom makes Saudi Arabia a hub for project finance.

“Saudi Arabia was not initially my first choice, but I found Dubai had contracted,” said Iqbal, a director of project finance at Riyad Bank (RIBL), the nation’s third-biggest lender. Saudi Arabia and Qatar are “where the deals are,” he said.

Riyadh climbed 32 places to 33rd in the Global Financial Centers Index published March 25 by London-based consulting firm Z/Yen. That made the Saudi capital the biggest gainer on an index led by London and New York. Dubai dropped one position to No. 23, with Qatar advancing five places to 30th on the list.

While Dubai is the Middle East base for banks including HSBC Holdings Plc (HSBA), Deutsche Bank and Standard Chartered Plc (STAN), Riyadh is mobilizing the region’s biggest stock market and a $500 billion Saudi government spending spree to bolster its credentials as a financial hub. Bankers in Riyadh and the Qatari capital, Doha, can also tap some of the greatest concentrations of the world’s super-rich, according to Boston Consulting Group.

“Dubai’s main disadvantage is that the big money clients and markets are elsewhere,” said Farouk Soussa, chief economist for the Middle East at Citigroup Inc. (C) in Dubai. “Clients want their bankers close. That creates a gravitational force that pulls bankers close into places like Doha, Riyadh and Abu Dhabi, despite them being otherwise less competitive than Dubai.”

April 12 (Bloomberg) -- Karine Kheirallah, director of advisory and execution at Falcon Private Bank Ltd., and Khaled Sifri, chief executive officer of Emirates Investment Bank, discuss private wealth in the Gulf region. They spoke April 9 with Jason Kelly at the Bloomberg Link Doha Conference. (Source: Bloomberg)

Regional Equities

Morgan Stanley and Credit Suisse Group AG (CSGN) are among the banks shifting regional equities teams to Riyadh as trading volumes on Saudi Arabia’s stock market surge. The nation’s capital, a congested metropolis of more than 5 million, is developing the King Abdullah Financial District to the north of the city as it seeks to attract more financial services firms.

Qatar, ranked third behind Singapore and Switzerland for the proportion of millionaire households, according to Boston Consulting, is also working to capture business from Dubai.

It’s offering cash from its sovereign wealth fund to asset managers setting up in the country, Qatar Financial Centre Authority Managing Director Abdulrahman Al Shaibi said on March 11. The nation, with a population of 1.76 million, may also set up a reinsurer and sell shares to the public as part of its bid to become a regional financial hub, he said.

April 12 (Bloomberg) -- Salman Al Jishi, chairman of the Salman Group of Companies, Paul Gamble, director of the sovereign group at Fitch Ratings, Firas Nasir, co-head of Carlyle Group LP's Middle East North Africa fund and Aamir Rehman, managing director of Fajr Capital Advisors, talk about opportunities in Saudi Arabia's economy. They spoke April 9 at the Bloomberg Link Doha conference in a panel session moderated by Bloomberg's Andrew J. Barden. (Source: Bloomberg)

Oil and Gas

Lacking the oil and gas of its neighbors, Dubai can’t afford to give up its lead in financial services, which accounted for 11.3 percent of gross domestic product in 2011. Finance, insurance and real estate contributed only 3 percent of Saudi Arabia’s GDP and 4.7 percent of Qatar’s in the third quarter of 2012, data compiled by Bloomberg shows.

The city of 2.1 million people became a regional banking hub after opening the Dubai International Financial Centre in 2004 to attract international banks, asset managers and insurers with promises of zero taxes for 50 years. The DIFC, as it’s known, is targeting financial institutions from Asia and reported a 16 percent increase in registered employees in 2012. Agricultural Bank of China opened a branch last month.

“Dubai is extremely competitive,” DIFC Chief Executive Officer Jeffrey Singer said in an interview yesterday. “If you’re coming new to the region, you have to justify why you wouldn’t come to Dubai.”

Dubai said in January it would create an Islamic finance council to regulate equity and fixed-income products to boost the industry’s role in the economy. Sales of Islamic bonds in the emirate have jumped almost 50 percent this year.

The Kingdom Tower stands illuminated at night on King Fahad Road in Riyadh, Saudi Arabia. Riyadh climbed 32 places to 33rd in the Global Financial Centers Index published March 25 by London-based consulting firm Z/Yen. Photographer: Waseem Obaidi/Bloomberg

Dubai Ahead

The emirate’s bond underwriting still exceeds Saudi Arabia and Qatar, with about $6 billion of issues by the Dubai government and related companies in the first quarter. Saudi issuers have raised $4.9 billion in bond sales this year, while Qatari issuance totals about $1.3 billion. Dubai accumulated about $113 billion of debt to develop finance and tourism.

While Boston Consulting figures show Riyadh’s bankers can tap the world’s highest concentration of households worth more than $100 million, constraints on women stemming from the Wahhabi version of Sunni Islam may make it difficult to persuade expatriates to work in Saudi Arabia’s financial center.

Men and women are segregated in public, including at schools, restaurants and lines at fast-food take outs. Women also need permission from a male guardian to go to school or get married, and are barred from driving. Dubai has no such restrictions and tolerates alcohol.

Visitors walk past outdoor restaurants in the Souq Waqif market in Doha. Qatar is ranked third behind Singapore and Switzerland for the proportion of millionaire households. Photographer: Gabriela Maj/Bloomberg

Financial Center

“For a financial center to flourish you need human capital, which will be a challenge for Riyadh given its various restrictions,” said Emad Mostaque, a London-based strategist at Noah Capital Markets. “Dubai has the best infrastructure to attract human capital: schools, good housing, recreational activities.”

The second largest of seven sheikhdoms in the U.A.E., Dubai was the region’s top placed city for infrastructure, ranking 34th, according to a 2012 survey by New York-based consultancy Mercer. Abu Dhabi came 72nd and Doha 102nd.

It also has the highest quality of life ranking in the Middle East, according to Mercer. The city-state ranked 73rd in the world with Abu Dhabi at No. 78, while Doha and Riyadh were ranked 106 and 157 out of 221 cities surveyed. Vienna and Zurich topped the index.

“In terms of development, in terms of infrastructure, the openness and ease of business, there’s nothing like Dubai in the region,” said Khaled Sifri, chief executive officer of Emirates Investment Bank PJSC. “It’s way ahead and it will take a long time for anyone else to try and catch up.”

Other Competition

That isn’t stopping other regional centers from trying. Apart from Saudi Arabia and Qatar, Turkey is building the Istanbul International Financial Center as part of Prime Minister Recep Tayyip Erdogan’s strategy to boost the country’s regional status and make the economy one of the world’s 10 biggest by 2023. Istanbul is No. 57 on the Z/Yen index.

While Abu Dhabi is constructing a financial center called Sowwah Square, the largest emirate in the U.A.E. fell one place in the Z/Yen ranking to No. 39. Bahrain, which crushed a Shiite Muslim revolt against its Sunni rulers in 2011, fell three places to 64th and is 23 positions below its 2010 ranking.

Qatar and Credit Suisse are strengthening ties after the holder of the world’s third-largest gas reserves took a 6 percent stake in the second-biggest Swiss bank, bought its London headquarters and formed asset manager Aventicum Capital Management.

Credit Suisse is shifting its regional investment banking headquarters to Doha, a person with knowledge of the matter said in December. It has also cut three equity positions in Dubai and transferring another to Riyadh, the person said.

Aggressive Qatar

“The financial services sector in Qatar is expanding aggressively and is hiring more than we’re seeing in the U.A.E. at the moment,” said Matthew Gribble, Dubai-based managing director ofMichael Page International Plc (MPI), a recruiter that operates in 32 countries. “It’s never easy getting people to Qatar compared to many markets, but it’s attracting people who are coming out of stressed markets in Europe and the U.K.”

Morgan Stanley (MS) has moved part of its Middle East equities business to Saudi Arabia and cut three positions in Dubai, according to a banker with knowledge of the matter. A spokesman for the New York-based bank declined to comment. Russia’s VTB Capital is also considering an equities business in Saudi, Makram Abboud, CEO in the Middle East and Africa, said Jan. 15.

Saudi Arabia’s $393 billion stock market is the Arab world’s largest bourse and three times the size of those in the United Arab Emirates and Qatar. While non-resident foreigners are only permitted to trade through share-swap transactions and exchange-traded funds, the country may soon allow overseas money managers to invest directly in shares of local companies, Deutsche Bank said in February.

The Kingdom may attract as much as $30 billion of inflows once it opens the market, John Burbank, founder of San Francisco-based hedge fund Passport Capital, said in February.

Qatar Plans

With Qatar’s plans to invest $140 billion in infrastructure before hosting the soccer World Cup in 2022, Doha shares Riyadh’s edge in project finance over Dubai, which was on the brink of default in 2009 after racking up debt to transform itself into a banking and tourism hub. Qatar is planning to build a metro network, roads, hotels and stadiums.

“Dubai will still be the preferred destination for companies and individuals in the short term,” said Angus Blair, Chairman of the Signet Institute, a Cairo-based regional research group. “As Doha and Riyadh develop and deepen their capital markets and financial services, it’s clear that this increased competition is a sign of the evolution of financial services in the region.”

source: http://www.bloomberg.com/news/2013-04-16/dubai-supremacy-challenged-as-global-banks-move-to-rivals-1-.html

Read More