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Arqaam Capital to focus on emerging markets

Monday, Jul 18, 2011

Gulf News

Dubai: Arqaam Capital , the Dubai-based regional investment bank, is positioning itself as an emerging market investment bank targeting the new silk route of trade and capital flows between Asia and Africa through the Middle East, CEO Riad Meliti told Gulf News in a recent interview.

“There are lots of opportunities in the emerging markets of the Middle East, Asia and Africa. We expect these opportunities and cross border deal flows to grow manifold in the coming decade. Based in Dubai we want to position ourselves as a leading regional emerging market institution,” said Meliti.

Established in 2007, Arqaam has a significant shareholder base in the region and has the main operating entity based in the Dubai International Financial Centre and regulated by the Dubai Financial Services Authority.

Despite the slowdown in investment banking in the region following the global financial crisis and due to the political turmoil across the region earlier this year, Meliti expects activities to pick up from this year.

The bank claims that it has grown at a compounded annual rate of 35 per cent since its inception, adding more than 40 client relationships every year

“ Arqaam was set up in the middle of the global financial crisis, thus we were better prepared to deal with the crisis. Since we have positioned ourselves to deal with the difficult market environment we are actually doing well. When we see anecdotal evidence of a recovery, we feel we are better positioned to capitalise on these opportunities,” he said.

According to the latest figures from Thomson Reuters on investment banking activities in the region, investment banking fees reached $197 million during the first half of this year, down 46 per cent from the first half of 2010 when fees reached $367.8 million. The sharp decline in revenues is attributed to the low level of activities resulting from the recent political turmoil in the region.

Meliti does not consider the recent political turbulence a major setback for the region or his company; rather he believes it is part of the political and economic evolution of the region.

“There hasn’t been any big change in the economic fundamentals of the region. Once the dust settles there will be a strong revival in activities across the region,” he said.

The company currently has seven business activities such as equity derivatives, credit, treasury, brokerage, corporate finance, asset management and custody.

Arqaam offers investment transactions opportunities and manages risk portfolios by offering a capital intermediation platform that facilitates access, both for Middle Eastern investors looking to invest in the region and internationally, and for international investors looking for opportunities in the Middle East.

Despite the overall bearish trend across the regional equity markets in the first half of this year, Arqaam said its equity brokerage division is growing steadily in the region.

With the increase in brokerage volumes across the GCC region, Arqaam expects to increase its market share.

Currently it has about five per cent of the market in the leading regional markets such as the Abu Dhabi Stock Exchange, Dubai Financial Market, Nasdaq Dubai and Doha Stock Market.

“We see huge potential for a volume increase in the GCC. With the inclusion of some key regional indices in the MSCI, we expect the volumes to surge on both regional and foreign demand,” he said.

In the asset management business, the company has two funds, Arqaam Capital Alpha Fund and the recently launched Arqaam Deep Value Fund, with about $105 million assets under management.

In corporate finance and cross border mergers and acquisition deals, Meliti is targeting East Africa and Asia.

“There is a large number of opportunities in places such as East African countries and Indonesia where Gulf investors are keen to invest. These are the markets where we already have our foothold and have acquired expertise to conduct business,” he said.

In the first quarter of the year, Arqaam Capital acted as exclusive financial adviser to Indonesia’s Bank Kesawan for a $73 million share sale to Qatar National Bank.

This deal follows Arqaam facilitating a strategic deal between CTI Group, a Jordan based cement and clinker trading company Indonesia’s Bosowa Corporation to expand each other’s business into new markets. In the next two quarters, Arqaam is expecting a series of East Africa focused deals from the Gulf.

Everyone in the investment banking business in the region laments the lack of credible official statistics on economic indicators and corporate performance.

Arqaam Capital is set to solve the data deficit through its own in-house research.

The company has already launched a research centre in Beirut and plans data aggregation on all markets where it operates.

By Babu Das Augustine, Deputy Business Editor

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