DUBAI: Dubai-based investment bank Arqaam Capital plans to expand into sub-Saharan Africa by the fourth quarter this year and may look at acquisitions in Saudi Arabia as part of its push into fast-growing emerging markets, its chief executive said.
Gulf investors, flush with petrodollars and facing limited growth options at home, are stepping into other frontier and emerging markets in Africa and Asia to get a foothold in debt and equity markets.
"We're also making a push into sub-Saharan Africa, basically the triangle of South Africa, Kenya and Nigeria. The plan is to open an office in South Africa by the fourth quarter of 2013," Riad Meliti told Reuters in a interview.
"This is driven by the growth rate in those markets, opportunities, stock market development, the undervalued stocks and lack of information on companies," he said.
The four year-old investment bank, which has offices in Dubai, Beirut, Libya and Egypt, is also looking at the best entry point into Saudi Arabia and will not shy away from acquisition opportunities in the largest Gulf Arab economy.
"Organic and inorganic options are available but it all depends on the right opportunity," Meliti said.
Arqaam capital sees itself as a frontier and emerging market investment bank taking advantage of the flow of money into these markets. The firm currently offers research on 121 stocks across the Middle East and aims to capitalize on investor interest and extend its research coverage to 150 by the end of the year.
"If Tadawul (the Saudi stock exchange) is classified as emerging market, it will attract 5-10 percent of the MSCI, which is $65 billion out of the $ 1.3 trillion index," Meliti said, referring to the possibility that Saudi Arabia could be added to influential MSCI Emerging Markets Index for investors.
Saudi Arabia's stock market is currently not open to direct investments by foreigners but the Kingdom is finalizing a framework to allow foreign ownership, the head of the market regulator said earlier in May.
According to research by Arqaam, $ 1.3 trillion of liquidity was allocated to emerging markets in 2012 compared with $ 200 billion in 2002. In the frontier market world, it was $ 5 billion in 2002 and is currently close to $ 100 billion.