Table of Contents

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01 Executive summary

  • The Middle East: a new world player
  • Development drivers
    • Regional markets
  • Currency harmonisation
  • The oil factor
    • Moves towards diversification
  • The wider region
  • Ready for take-off
  • Key points

Section01

Countries of the Middle East region: economic and political fundamentals

Chapter 01

Bahrain

  • Overview
    • History
    • Economy
    • Industry
    • Banking
    • Stock Exchange
    • Gulf Co-operation Council
  • Economic analysis
    • Macro-economic performance
    • Government policy
    • Government finance and debt
    • Commercial banks

Chapter 02

Kuwait

  • Overview
    • Economy
    • History
    • Government
    • Stock Exchange
  • Economic analysis
    • Macro-economic performance
    • Government finance and debt
    • External vulnerability and liquidity

Chapter 03

Oman

  • Overview
    • History
    • Economy
    • Stock Exchange
    • The State General Reserve Fund (SGRF)
    • Foreign investment
    • Future objectives
  • Economic analysis
    • Macro-economic performance
    • Government finance and debt
    • External finances

Chapter 04

Qatar

  • Overview
    • Economy
    • Industry
    • Foreign investment
    • Stock Exchange
    • Future objectives
  • Economic analysis
    • Macro-economic performance
    • The domestic economy
    • Government finance and debt
    • State assets
    • External current account

Chapter 05

Saudi Arabia

  • Overview
    • Economy
    • Saudi Arabian Monetary Agency
    • Stock Exchange and Economy
    • Future objectives
  • Economic analysis
    • Macro-economic performance
    • Changing fundamentals
    • Government finance and debt
    • The external economy

Chapter 06

United Arab Emirates

  • Overview
    • History
    • Economy
    • Oil
    • Stock Exchange
  • Economic analysis
    • Macro-economic performance
    • The domestic economy
    • Government finance and debt
    • The external economy

Section02

Investing Institutions

Chapter 07

Future generations funds

  • Overview
    • Guiding principle
  • How Future Generations Funds work
  • The Western fund manager’s perspective
    • Demanding investors
    • The external manager mix

Chapter 08

Saudi Arabian Monetary Agency (SAMA)

  • Overview
  • SAMA’s functions in modern-day Saudi Arabia
    • SAMA’s size
    • Management
    • Links with foreign banks and consultants
    • Links with the Saudi government
    • Investment strategy

Chapter 09

The Abu Dhabi Investment Authority (ADIA)

  • Overview
  • ADIA’s functions in modern-day UAE
    • ADIA’s size
    • Management
    • Links with banks and consultants
    • Links with the UAE government
    • Investment strategy

Chapter 10

The Kuwait Investment Authority (KIA)

  • Overview
  • KIA’s functions in modern-day Kuwait
    • The Kuwait Investment Office (KIO), London
    • KIA’s size
    • Management
    • Links with banks and consultants
    • Investment strategy

Section 03

Macro-economy and ratings

Chapter 11

Economic background

  • Overview
  • The history of Middle East borrowing

Chapter 12

Debt issuance and ratings

  • Overview
    • Petrodollar liquidity management
  • Bahrain
  • Rating outlook
  • Kuwait
    • Rating outlook
  • Oman
    • Rating outlook
  • Qatar
    • Rating outlook
  • Saudi Arabia
    • Rating outlook
  • United Arab Emirates
    • Macro-economic performance
    • Government finance and debt
    • External vulnerability and liquidity

Section 04

Regional financial markets

Chapter 13

Middle East fund management since 11 September 2001

  • Bringing the petrodollars back home
  • Infrastructure
  • Regional markets
  • Fund management
  • Local investment firms
  • New trading trends
  • Regulation and market practice
  • The role of consultancy
  • Conclusions

Chapter 14

The oil price effect

  • Overview
  • Economic growth record
  • Investment opportunities
  • Investor euphoria
  • Drivers of the Middle East boom
  • The decline of the markets
  • Conclusions and predictions

Chapter 15

Real estate

  • Overview
    • Dubai’s new stability
  • Real estate investment trust (REIT) developments
  • Case study: Bahrain’s real estate boom
    • Attracting foreign investment
    • Investor demand
    • Financial implications
    • Tourism in Bahrain

Chapter 16

Initial public offerings

  • Overview
  • Emaar Economic City, Saudi Arabia
  • Gulf Navigation Holding, UAE
  • Telecom Egypt, Egypt
  • Albaraka Banking Group, Bahrain

Section 05

Key products

Chapter 17

Equities

  • Overview
    • Causes of strong equity performance
  • How the bubble bursts
    • Government response
  • Outlook
    • The possible impact of US markets
    • Investor prospects
  • Gulf stock exchanges
    • Tadawul All Share Index (Saudi Arabia)
    • Dubai Financial Market (UAE)
    • Bahrain All Share Index
    • Doha Securities Market Index (Qatar)
    • Kuwait Stock Exchange
    • The Gulf markets overall

Chapter 18

1Bonds

  • Overview
  • Five-year floating rate notes
  • Bond details
    • Bonds listed on the Bahrain Stock Exchange
    • How to issue bonds on the Bahrain Stock Exchange
    • How to issue bonds on the Muscat Stock Market (Oman)
    • How to issue bonds on the Dubai Financial Market (UAE)

Chapter 19

Funds

  • Overview
  • The fund markets
    • Saudi Arabia
    • Kuwait
    • Oman
    • Bahrain
    • The UAE
  • Islamic funds
  • Hedge funds

Chapter 20

Project finance

  • Overview
  • Saudi Arabia
  • Bahrain
  • Oman
  • UAE
  • Qatar
  • Project finance data

Chapter 21

Private equity

  • Overview
  • Economic buoyancy in the GCC
  • Large investment institutions
    • International limited partners
  • Geographical focus
  • International/local partnerships
  • Bahrain
  • Saudi Arabia
  • Qatar
  • Building on property
  • Investment from Europe and the US
  • Shari’ah compliance and private equity
  • Future prospects

Chapter 22

Islamic finance

  • Overview
    • Financing options
    • Market development
  • Basic principles
  • Shari’ah banking
  • Islamic finance products
  • Sukuks
    • Landmark sukuk deal
    • Growth of the sukuk market
    • Securitisation and the sukuk
  • Case study: Caravan I
    • Challenges for Islamic securitisation
    • Accounting issues
  • Other Islamically-compliant products
    • Derivatives
    • The concept of Islamic hedge funds
  • Shari’ah-compliant funds and companies
  • Funds
  • Financial leverage
  • Buyouts and recapitalisations
  • Permitted lending
  • Case study: Bahrain - The Islamic finance capital
    • Market size and regulation
    • The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)
  • Opportunities for global banks
    • Deutsche Bank
    • HSBC
    • Islamic Bank of Britain
  • Future developments in Islamic finance
    • Non-Gulf centres
  • Islamic finance glossary

Section 06

Middle East financial centres

Chapter 23

Dubai

  • Dubai International Financial Centre
    • The DIFC’s aims
    • Key components of the DIFC
    • Functions of the DIFC Authority
  • The market opportunity
  • The Dubai Financial Services Authority
    • DFSA powers and functions
  • The DIFC Judicial Authority
    • The DIFC Registrar of Companies (ROC)
  • The Dubai International Financial Exchange
    • Benefits of listing on the DIFX
  • DIFC Investments
  • Hawkamah Corporate Governance Institute (CGI)
  • DIFC laws and regulations
  • Banking services
  • Doing business in the DIFC

Chapter 24

Bahrain

  • The financial sector in Bahrain
  • Bahrain Monetary Agency
    • Functions of the BMA
    • Capital Markets Supervision Directorate
  • Licensing and Policy Directorate
    • Licensing categories
  • Monetary policy
  • Banking operations
    • Banking success

Chapter 25

Qatar

  • Development
  • Economy
  • Financial centre
    • History and structure of the Qatar Financial Centre
    • Doing business in the QFC
    • The application process
  • The QFC Regulatory Authority
  • QFC Tribunal and Appeals Body
  • Supervision of Financial Institutions Division
  • Doha Securities Market

Section 07

Banking: international and regional

Chapter 26

International banks

  • Overview
  • HSBC
    • Regional player by tradition
    • Oil fund clients
    • Project finance
    • Capital markets development
    • Equity capital markets
    • Mergers and acquisitions
    • Shari’ah-compliant products
    • East to East
    • Private wealth management
    • New centres raise the competitive stakes
  • Deutsche Bank
    • Changing role
    • Learning from Asian markets
    • International investment
    • Saudi Arabia opens up
    • Consolidation
    • Shari’ah-compliant products
    • The Gulf region
  • Other international banks
    • Project financing
    • M&A
    • Regional expansion

Chapter 27

Regional banks

  • Taking a lead role
  • Sector strengths and limitations
  • Opportunities for consolidation
  • Market developments
    • Real estate boom
  • Banking regulation
    • Caution on loans
  • Growth areas for banking
    • Retail services
  • Future prospects
    • Loan growth
    • Debt financing
    • Long-term capitalisation concerns

Section 08

Conclusion

  • Period of opportunity
    • The investment tranche
  • Rebalancing portfolios
    • Corporate risk
    • Cash flow is king
  • East to East
  • Preparing for a post-oil future
    • Private sector role
    • Opening up
    • Too many centres?
  • New products
  • Monetary union: the way forward?
  • Opportunities and challenges

Appendix

Other MENA countries

  • Algeria
    • Economy
    • Outlook
  • Egypt
    • Economy
    • Outlook
  • Iran
    • Economy
  • Iraq
    • Economy
    • Outlook
  • Jordan
    • Economy
    • Outlook
  • Lebanon
    • Economy
    • Outlook
  • Libya
    • Economy
    • Outlook
  • Morocco
    • Economy
    • Outlook
  • Syria
    • Economy
  • Tunisia
    • Economy
    • Outlook

List of tables and figures

  • Table 1.1: Bahrain - Financial statistics, 1998-2007f
  • Table 2.1: Kuwait - Financial statistics, 1998-2007f
  • Table 3.1: Oman - Financial statistics, 1997-2006f
  • Table 4.1: Qatar - Financial statistics, 1998-2007f
  • Table 5.1: Saudi Arabia - Financial statistics, 1997-2006f
  • Table 6.1: UAE - Financial statistics, 1997-2006f
  • Table 10.1: KIA share dealing, 1986-2003 (KD)
  • Table 11.1: Middle East countries by type of economy
  • Table 11.2: MENA external debt and aid flows, 1990-2003 (US$bn, %)
  • Table 11.3: External debt of Middle East countries, 2005e (US$bn)
  • Table 12.1: Bahrain banks - Moody’s ratings & outlook
  • Table 12.2: Bahrain - S&P Credit Ratings
  • Table 12.3: Bahrain - Fitch Ratings
  • Table 12.4: Kuwait banks - Moody’s ratings & outlook
  • Table 12.5: Kuwait - S&P Credit Ratings
  • Table 12.6: Kuwait - Fitch Ratings
  • Table 12.7: Oman banks - Moody’s ratings & outlook
  • Table 12.8: Oman - S&P Credit Ratings
  • Table 12.9: Oman - Fitch Ratings
  • Table 12.10: Qatar banks - Moody’s ratings & outlook
  • Table 12.11: Qatar - S&P Credit Ratings
  • Table 12.12: Qatar - Fitch Ratings
  • Table 12.13: Saudi Arabia banks - Moody’s ratings & outlook
  • Table 12.14: Saudi Arabia - S&P Credit Ratings
  • Table 12.15: Saudi Arabia - Fitch Ratings
  • Table 12.16: UAE banks - Moody’s ratings & outlook
  • Table 14.1: Daily crude oil production based on secondary sources, 2004-3Q06 (000 b/d)
  • Table 16.1: Selected Gulf IPOs, 2004-05 (US$m)
  • Table 17.1: Key stock market indicators, May 2006
  • Table 17.2: Gulf capital markets, 2006
  • Table 17.3: GCC stock markets performance, 2003-05
  • Table 18.1: Middle East floating rate international bonds, 1996-2006 (US$m)
  • Table 18.2: Government bonds listed on the Muscat Stock Market
  • Table 18.3: Commercial bonds listed on the Muscat Stock Market
  • Table 20.1: Middle Eastern project finance loans, Jan-Sep 2006 (US$m)
  • Table 20.2: Middle Eastern project finance loan volumes, 2000-06 (US$m)
  • Table 20.3: Middle Eastern project finance loan volumes by domicile nation, 2005, 2006 (US$m)
  • Table 20.4: Middle Eastern project finance loan volumes by sector, 2005, 2006 (US$m)
  • Table 21.1: Private equity firms in the Middle East
  • Table 21.2: Traditional private equity funds in the Middle East Table 22.1: Caravan I Ltd transaction
  • Table 22.2: FTSE DIFX Shari’ah Index Series - top five constituents, July 2006 (US$m)
  • Table 22.3: FTSE DIFX Shari’ah Index Series - country breakdown, July 2006 (US$m)
  • Table 23.1: Financial and ancillary services permitted and regulated by the DFSA
  • Table 23.2: DIFC licensing and registration steps by business activity
  • Table 24.1: BMA licensing process
  • Table 24.2: BMA annual licensing fees
  • Table 25.1: Firms licensed by the QFC Authority, Nov 2006
  • Table 25.2: Firms authorised by the QFCRA, Nov 2006
  • Table A1: Algeria - Key data, 2005
  • Table A2: Egypt - Key data, 2005
  • Table A3: Iran - Key data, 2005
  • Table A4: Iraq - Key data, 2005
  • Table A5: Jordan - Key data, 2005
  • Table A6: Lebanon - Key data, 2005
  • Table A7: Libya - Key data, 2005
  • Table A8: Morocco - Key data, 2005
  • Table A9: Syria - Key data, 2005
  • Table A10: Tunisia - Key data, 2005
  • Figure 8.1: Saudi Arabia stock market indicators, 1990-2001
  • Figure 8.2: SAMA organisational chart
  • Figure 8.3: SAMA reserve management structure
  • Figure 14.1: OPEC reference basket, weekly spot crude prices, 2004-06 (US$bn)
  • Figure 14.2: Weekly average basket price, 2006 (US$bn)
  • Figure 14.3: Crude oil overlaid with the Saudi Tadawul Stock Market Index, 2002-2Q06
  • Figure 15.1: Dubai real estate investment yields, 1H2005-1H2006 (capitalisation rates)
  • Figure 17.1: Middle Eastern equity markets versus MSCI emerging markets, 2000-06
  • Figure 17.2: Market index performances, pre and post-bubble
  • Figure 17.3: Tadawul Stock Exchange turnover, May 2004-Sep 2006 (US$m)
  • Figure 17.4: Dubai Financial Market turnover, Dec 2004-Aug 2006 (US$m)
  • Figure 17.5: Abu Dhabi Securities Market turnover, Dec 2004-Aug 2006 (US$m)
  • Figure 17.6: Bahrain Stock Exchange turnover, Dec 2004-Sep 2006 (US$m)
  • Figure 17.7: Doha Securities Market turnover, Jan 2005-Oct 2006 (US$m)
  • Figure 17.8: Kuwait Stock Exchange turnover, June 2004-Oct 2006 (US$m)
  • Figure 17.9: Change in Gulf capital markets indices, Jan 2005-Apr 2006 (%)
  • Figure 22.1: Caravan I Ltd structure
  • Figure 22.2: Alternative (simple) structure 1
  • Figure 22.3: Alternative (simple) structure 2
  • Figure 23.1: DIFC structure
  • Figure 24.1: Structure of the Bahrain Monetary Agency
  • Figure 25.1: Structure of the QFC
  • Figure 25.2: Structure of the QFCRA
  • Figure 27.1: Bank credit/GDP ratios - Gulf economies vs Western Europe, 2005 (%)
  • Figure 27.2: Major Gulf banks - Assets and equity, 2005 (US$bn)
  • Figure 27.3: Share of top three local banks in total national banking assets and deposits, 2005 (%)
  • Figure 27.4: Gulf bank ratings, 2000-06
  • Figure 27.5: Gulf bank loan exposure to real estate/construction, 2004, 2005 (%)
  • Figure 27.6: Major Gulf banks - aggregate asset/liability maturity profile, 2005 (US$bn)
  • Figure 27.7: Gulf banking revenues, 2005 (%)

Section 08

Conclusion