By Suleiman Mohammed Al Rubaie
Finance and investment: adapting and prospering in a new landscape
We witnessed some stability in oil prices in 2017, as well as improvement in select GCC capital markets. Instruments were diversified, including debt issuances and visible enhancements of equity exchange processes to comply with international standards.
Regional governments have committed to tackle all challenges – economic or otherwise – with measures including subsidy cuts, and enhanced taxation systems including value added tax (VAT) to support fiscal budgets. This is expected to continue in 2018 and beyond, despite negative sentiment among the public that could affect the top and bottom lines of consumer related sectors.
Politically, the year ends with continued tension in the Gulf, a more confrontational approach with Iran, and President Trump’s official recognition of Jerusalem as Israel’s capital, condemned not only by the Arab and Islamic world but by the international community as a whole. This move promises further volatility in the region.
Regional geo-political uncertainties mean economic outlook is harder to predict.
It will most likely take a toll on equity markets, investment banking deal flows and capital raising efforts, making the operating environment more challenging. This is particularly true for companies limited to a particular country, or to specific product lines. Firms with diversified bases will be able to manoeuvre, albeit with certain necessary adjustment plans.
“Adapt and prosper” should be the theme to 2018. Regional tensions, tighter government controls and heightened regulatory and transparency standards are all issues that firms and investors must learn to live and navigate through. Firms that adapt to the new norm will prosper, and ones that resist will not.
The inclusion of Saudi Arabia and Kuwait in the MSCI and FTSE emerging market indices should raise capital flows. The question to ask, however, is whether these inflows are a rebalancing of portfolios to match that of mandated weights, or whether these inflows are opportunistic investors rushing in.
Being a MENA player, we cannot remain stagnant in the face of headwinds. Despite volatile and challenging times, we continue to maintain profitability through value creation for our stakeholders, which we accomplish through a resilient and robust fee-based business model, benefiting from regional presence and a wide client base.
Our ability to be malleable in any given environment in the past is a true testament to the fact that we are ready for what’s to come.