What new initiatives is Abu Dhabi Capital Management involved in?
ALSEDDIQI: In 2011 we have capitalized on the lack of liquidity in the region and we have deployed a lot of capital into different asset classes but mainly private equity and debt to capitalize on the liquidity dislocation. We have already, in such a short period of time, seen the results of our capitalization of this opportunity of providing liquidity to illiquid situations and we have generated a lot of returns for our investors – and returns much above what is currently the average in the investment world.
What is your economic outlook for the United Arab Emirates?
ALSEDDIQI: The United Arab Emirates is a very important market that will witness a lot of growth in the coming years. There is going to be a lot of spending on infrastructure, tourism, and the United Arab Emirates has been getting a lot of inflow as a safe haven. So I believe the prospects for the United Arab Emirates are one of the highest in the region. I believe the oil and gas sector is going to witness very huge growth in the coming years. The oil and gas sector is the backbone of the region and global demand has been on the rise for the past hundred years. There is going to be increasing capacity in each country in the region. Increasing investment has already started in the oil and gas sector and it is very likely that this will continue to increase to cater for the world demand. It is also very important to note that the oil price has been averaging around $100 per barrel, which is an incentive for oil producing countries to continue expanding their capacities.
Currently, what do you see as the best investment opportunities?
ALSEDDIQI: I believe investments in real estate and capital markets are very attractive today. Real estate as a hard asset and capital markets have taken a hit over the past few years. Valuations are very lucrative and pricing has gone down lower than countries with debt problems in Europe. The stock market is very lucrative, the problem is liquidity. This problem will be solved with time so there is a lot of opportunity to tap the capital markets right now. In terms of real estate, the market in Abu Dhabi and Dubai is bottoming out and it is going to be an interesting ride over the next few years. I would say residential and selective commercial is a good investment. There is definitely an over supply of commercial real estate in the UAE, however, in very specific pockets in those two emirates, it would be a very good investment. For developed markets, a good investment would be in private equity and debt in Europe and the US. Currently, pricing is very low and there are huge opportunities that did not exist before. So for developed markets, US and European private equity and debt will be very rewarding for investors. For underdeveloped economies or frontier economies, I believe the GCC region is a very good bet. Again, private equity, public equities, and real estate are going to be a very strong investment in the coming years. Pricing is now low and there is a lot of future spending and projects on the way. There are very bright prospects in terms of GDP growth and population growth.
What is the state of project finance in the region?
ALSEDDIQI: Project finance in the region is challenging. Banks are not lending as they used to in the past because of the mismatch in assets and liabilities on their balance sheets. This will eventually improve with time, but definitely it is getting more challenging in the region. This will hopefully not hinder the progress of projects that are ongoing in the region.
What are your projections for bond issuance in 2012? How would you describe the appetite for high-grade (sovereigns and strong corporate) debt at present?
ALSEDDIQI: In the past few weeks of 2012, a lot of banks and companies have tapped the international debt markets and they have been very successful compared with the same period in 2011. I believe this will continue. The debt markets internationally are very favorable towards GCC risk and GCC sovereign and strong corporates. The interest rates are at very low levels so I strongly believe that more corporates and sovereigns are going to tap the international debt markets in the coming months and years.
I am a strong believer that the regional capital markets and specifically the Dubai and Abu Dhabi stock exchanges do not reflect the true economy of the UAE. The markets here do not have variety. There are only a few companies representing each sector. There are a few sectors that are completely underrepresented with only two or three companies. The most important reason for the lack of performance for the UAE markets is liquidity. There is a huge lack of liquidity in the local capital markets and this is what is driving the prices down.
Are share prices on the UAE’s exchanges fair?
ALSEDDIQI: I am a strong believer that the regional capital markets and specifically the Dubai and Abu Dhabi stock exchanges do not reflect the true economy of the UAE. The markets here do not have variety. There are only a few companies representing each sector. There are a few sectors that are completely underrepresented with only two or three companies. The most important reason for the lack of performance for the UAE markets is liquidity. There is a huge lack of liquidity in the local capital markets and this is what is driving the prices down. It is not because of the performance of the companies and it is not because of the economy of the country; it is because of liquidity, lack of variety of companies, and last but not least, the lack of sector representation in the UAE capital markets. I believe to address those issues liquidity has to be seriously worked on for those markets. Market makers need to be introduced to the UAE’s stock exchanges, it would also be helpful to get the MSCI upgrade for the UAE exchanges. Last but not least, there should be different IPOs coming to the market, increasing the variety and including very successful companies so the liquidity can tap into the markets.