Mideast sovereign investors hunt for bargains in Europe

Gold now accounts for 4.8 percent of central bank reserve portfolios. (AFP)
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Updated 23 July 2020

Mideast sovereign investors hunt for bargains in Europe

  • On average, 4.8 percent of total central bank reserve portfolios are now allocated to gold — up from 4.2 percent in 2019

RIYADH: Middle East sovereign investors have piled into European companies in the wake of the coronavirus disease (COVID-19) pandemic, according to an Invesco survey.

Sovereigns in the Middle East were more likely to look to Europe for bargains over the next 12 months, with 38 percent increasing their exposure to emerging Europe and the same proportion to developed Europe. 

“The market turmoil in March and April saw asset prices fall considerably, especially as some investors sold securities to ensure liquidity,” said Zainab Kufaishi, head of Middle East and Africa at Invesco. “This presented opportunities to gain exposure to ‘blue chip’ companies at good prices.” 

Sovereign wealth funds in the Gulf are among the biggest in the world. Invesco said many were well prepared for the COVID-19 crisis, which it called an “unprecedented buying opportunity.”

Funds, it added, had learned the lessons from the 2008 financial crisis, which included building large cash reserves and making organizational improvements for managing liquidity.

At the end of 2019, even before COVID-19, Middle Eastern sovereign funds were cautious. Their average equity allocations as an overall proportion of the portfolio was 16 percent, compared to 26 percent for their peers globally.

Looking forward, 43 percent of Middle East sovereigns said they planned to increase allocations to equities at lower valuations, with 29 percent of sovereigns aiming to decrease equity allocations.

At the same time, 57 percent said they would increase fixed income allocations, 43 percent would boost infrastructure exposure and half planned to increase their private equity allocation.

“Traditionally, fixed income is seen as a defensive anchor and this was tested by the crisis with even US government debt caught up in a broad sell off as investors rushed into cash. However, government interventions ... had a positive impact on many fixed income portfolios” said Rod Ringrow, head of official institutions at Invesco.

Gold has also proven popular among sovereign investors. On average, 4.8 percent of total central bank reserve portfolios are now allocated to gold, from 4.2 percent in 2019, with almost half citing a potential to replace negative yielding debt as a primary advantage. “Last year’s study found gold to be growing in popularity, but COVID-19 has revealed it as an asset class now staking a claim to a new role within sovereign portfolios,” added Ringrow.


Arabtec Holding said to hire AlixPartners for debt advisory

Updated 25 September 2020

Arabtec Holding said to hire AlixPartners for debt advisory

DUBAI: Dubai-listed contractor Arabtec Holding has hired advisory firm AlixPartners to help it restructure the company’s debt, two sources familiar with the matter said.

AlixPartners is assessing the company’s debt profile, before any potential discussions with Arabtec’s creditors, according to the sources, who declined to be named as the matter is not public.

Arabtec did not respond to a query for comment when contacted on Thursday. AlixPartners declined  to comment.

Arabtec Holding is due to hold a shareholder meeting on Thursday afternoon to decide whether to continue operating or liquidate and dissolve the firm after the pandemic hit projects and led to additional costs.

FASTFACT

 

Arabtec last month posted a first-half loss of 794 million dirhams ($216.18 million).

The company, which last month posted a first-half loss of 794 million dirhams ($216.18 million) and total accumulated losses of 1.46 billion dirhams, said on Sept. 9 that it was calling a general assembly under an article of UAE company law.

The law requires companies to vote on whether they should continue operating if their accumulated losses reach half of their issued share capital.

Shares of Arabtec Holding, which helped to build the Louvre Abu Dhabi and the world’s tallest skyscraper, the Burj Khalifa in Dubai, have plunged 56.7 percent this year. They were down almost 5 percent when a suspension of trading was triggered at 1 p.m. local time ahead of the meeting, which was being held in Abu Dhabi.

Several UAE companies have sought to extend debt maturities or agree better terms in recent years to avoid defaults, after an oil price crash hit energy services and construction.

This week, creditors started to enforce claims against Abu Dhabi-based Al Jaber Group, which has struggled since building up debt in the wake of a UAE real estate crisis and began talks with creditors in 2011.

Dubai-listed construction firm Drake & Scull is working under the UAE bankruptcy law to reach an agreement with its creditors in an out-of-court process.