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Bank of America-Merrill Lynch is rebasing its head of frontier markets research to Dubai, the lender, as it looks to take advantage of growing interest in the Gulf and surrounding region, particularly ahead of the opening up of Saudi Arabia’s $530bn bourse to foreign investors in 2015.
Hootan Yazhari, head of frontiers markets equity research at the BoA-ML, will relocate from the bank’s European headquarters in London to Dubai – where the US lender will join the throng of other international finance firms already strengthening their presence in the Gulf.
“About 80% of the frontier stocks we cover are within Central and Eastern Europe, the Middle East and Africa, so it makes sense that he will be based in Dubai, which will be the hub,” a spokesperson told Reuters.
Analysts note that banks poured resources into teams in Dubai leading up to 2007-2008, but many firms subsequently scaled back or withdrew altogether after the financial crisis.
However, stock markets are now rebounding across much of the region, with Dubai’s benchmark index more than doubling in value in 2013 and rising nearly 50% this year – helped by the upgrade of the UAE and Qatar to emerging market status by MSCI.
As the competition in Gulf markets intensifies, the knock on effect is slimming profits for locally-based banks and financial institutions, who are in turn being increasingly incentivised to diversify their investments into higher risk but higher margin African markets.
Qatar National Bank (QNB) has swiftly acquired a 23.5% stake in Ecobank, a South Africa-based, Lagos-listed lender – through two deals with a combined value of over $500m – and declared its intention to become the largest bank in the Middle East and Africa by 2017.
GCC institutions are also busy arranging Islamic finance mechanisms in the continent, this last week and Kuwait Finance House debuted a $500m sovereign sukuk in South Africa, the first in the country, the second on the continent, and the third outside of an Islamic country.
At the same time, African stock exchanges are developing their capacities in leaps and bounds, with the Nairobi Securities Exchange (NSE) self-listing on the 9th September in an IPO that was heavily oversubscribed, leading to a surge in the stock value after trading began.