CEO named one of the 25 most influential asset managers from Tokyo to Dubai

Dubai - 30 June 2009: Ziad Makkawi, chief executive officer and founder of leading asset management company Algebra Capital Limited (Algebra), is optimistic that the worst of the impact of the global credit crisis on emerging and regional market economies has passed already. According to Makkawi, the persisting global credit crisis is the single most dangerous impediment today to a global recovery. It is, however, less severe and more manageable in developing economies that did not go on a borrowing binge, than in the more developed economies.

He explains: "The banking systems in the majority of emerging markets, with the exception of Central and Eastern Europe, do not pose the same systemic risks, as those present in the US and Western Europe. For the most part, in emerging markets - and in the GCC in particular - the depth of resources available relative to the problems is more than sufficient, and has so far been used judiciously to manage the problems. In the case of those economies whose currencies are pegged to the US dollar or whose assets and reserves are mostly in US currency, the medium term will prove challenging as the US authorities are now resorting to printing money to re-inflate the economy and buying-out, or becoming the creditor of last resort, across industries. This obviously increases the risk of hyperinflation at some indeterminate point in the future, and requires vigilance and forward planning. We are already seeing some embryonic efforts  take place, with reserve currency diversification discussions  at the first and very symbolic BRIC (Brazil, Russia, India, China) Summit, held in Russia this month."

"Regional governments have, for the most part, managed this crisis with cool heads; they understand the seriousness of the crisis and have so far intervened effectively to bring calm back to the markets. The short-comings of the regional markets in terms of lack of transparency, and the short-comings of the regulatory environment, such as effective bankruptcy regimes, have been brought to the surface and will need to be addressed in the very near future to re-establish trust and confidence. Budgetary spending, which was already at record levels prior to the crisis, has been maintained to continue funding much needed infrastructure. This, combined with crude oil at over $50 per barrel, means that budget deficits can be kept to a minimum; above $70 per barrel and many in the region will be back in surplus accumulation mode," he continues.

"We at Algebra Capital are optimistic that the worse is behind us when it comes to the region's economies. However, it is likely that we will see further downside pressure and increased volatility on asset prices as global markets go through a second round of de-toxification. In that event it is likely that we will continue to show high levels of correlation. In the medium term, however, with every round this will be less so and healthy economic realities in many emerging markets will prevail. In MENA, the young asset management industry will continue to flourish as, more retail and institutional investors realize the importance of having their savings and funds professionally managed in line with their appetite for risk. Also, with the return of  international institutional investors to emerging markets, the region will draw some of these funds on the back of strong economic growth, low inflation, and positive earnings. The bond and Sukuk markets are also attracting new interest from investors who appreciate their risk-adjusted returns."

"We believe that 2009 will continue to present major challenges, as the economy is highly dependent on a banking system still not trusting enough to start lending again. If however  the last market rally is an indicator of future economic performance at company level, this points to a dramatic change in sentiment over the last couple of months. At the beginning of the year there were some USD 3 trillion in short-term money market funds in the US alone, a clear flight-to-safety. Today, some of these funds are being re-deployed into higher risk and higher duration instruments such as bonds and equities, and a trickle is making its way back into emerging markets; enough to explain the most recent  positive boost, and a glimpse of things to come when confidence returns to the markets" he adds.

Makkawi points out that the MENA region remains one of the fastest growing areas in the world with substantial wealth, relatively low levels of leverage and falling inflation. These, he says, "are strong and attractive attributes in this uncertain global economy".   

"We are seeing tremendous investment opportunities," Makkawi says, "both conventional and Shari'a-compliant, in the current market environment. I believe that the demand for Shari'a-compliant investing, in particular, will continue to grow rapidly, particularly in the current climate, where it is recognized as aiming for better risk-sharing between those who have and those who need funds. The Shari'a regulatory framework aims to establish a greater degree of social harmony, the avoidance of usury and - especially important to many investors today - the proper sharing of risk. Increasingly, we are seeing cross-over investors from the conventional space investing in Shari'a-compliant instruments."

"Algebra was established to bring together the best of international standards with on-the-ground experience and research of the Middle East, offering both regional and international investors a premium quality, regionally focused service. Our local knowledge and expertise make us ideally positioned to take full advantage of opportunities within the region for the benefit of investors, and we will continue to build our organization to meet the highest international standards. We intend to use this time to demonstrate Algebra's ability to operate at the highest levels and with maximum effectiveness as an independent asset management firm."

"We have to be able to see beyond the immediate distress in the markets and position ourselves for the recovery. The challenge for our industry is to find imaginative and profitable ways of encouraging investors back into the market," Makkawi observes, "in order to unleash the region's substantial financial reserves and put them back to work. Confidence from the banking system in their clients is where it starts; the banks must start lending again and fulfil their social and economic responsibility."

Makkawi was recently named one of the top 25 most influential asset managers in the Asia and regional markets for his role in advancing the area's nascent asset management business and pioneering work in developing regional equity and fixed income investing. 

Algebra Capital was founded in 2006 by Ziad Makkawi and a team of highly experienced professionals, and rapidly became established as a leading asset management company, attracting US counterpart, Franklin Templeton Investments, as a strategic investor. To date, the two firms have successfully launched and marketed five MENA equity funds worldwide, and continue to work on several other initiatives aimed at developing the nascent but high growth regional asset management business. 

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For further information, please contact:
Maryam Keblawi
SAHARA Communications
Tel: +971 4 3298996 
Fax: +971 4 3298995
Mob: +971 50 4779923
E-mail: maryam@saharagcc.com
www.saharagcc.com

© Press Release 2009