UAE markets to pick up in three to seven years

10 January 2011

Banks need to begin lending to strengthen economy

Chief executive officer of investment bank Shuaa Capital says it will take three to seven years before the UAE economy picks up, “but even then, it won’t be as colourful as the growth years of 2007 and 2008. The UAE stock market is undervalued and companies are trading at considerable discount”, says Sameer al-Ansari.

“2010 was a year to forget. This year is the year to rebuild and we are in far better shape now than we were back in 2010,” he adds.

Board members agreed that less wealth erosion and changes to regulations are required to bring life back to the economy. “Banks need to begin lending once again. No economy can grow without lending growth and it is a challenge that needs to be addressed,” says Makram Kubeisy, head of investment banking.

The challenges were highlighted when Dubai-based mobile phone retailer Axiom cancelled its initial public offering (IPO) last year. “It had more to do with bad timing,” says Kubeisy. Axiom had planned to float 35 per cent of its shares to raise $760m-$1.09bn, but concerns about market conditions and liquidity led to the cancellation in December 2010.

There were $900m-worth of IPOs in 2010 in the GCC, primarily in Saudi Arabia, which is relatively small for the region.

Shuaa Capital had total assets of AED2.2bn ($590m) as of end third quarter 2010. Its investment portfolio was reduced from AED1.6bn to AED833m between third quarter of 2009 and 2010. Al-Ansari says the bank will continue to focus on the UAE and Saudi Arabian markets this coming year with particular interest in the oil and gas, logistics, infrastructure and healthcare sectors.

In November last year, UAE economy minister Sultan al-Mansouri predicted improved growth of between 3 and 3.5 per cent in 2011 on the back of higher oil prices and increased trade.

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