Although the rash of corruption probes and fraud charges in Dubai may ultimately strengthen the emirate's economy, the pall the investigations have cast over the market is unlikely to lift soon.
The most recent sign the investigations may still be gaining momentum was yesterday's allegations by prosecutors that Abid al Boom, an Emirati businessman, ran a bogus investment fund that fraudulently took Dh846 million (US$230m) from thousands of investors.
While the alleged scheme appeared to be separate from other probes rocking Dubai's business circles, the press conference held to explain the charges made clear the Government's determination to push forward in the emirate's biggest and most public anti-corruption drive in memory.
This followed an announcement by the Dubai Public Prosecutor's office that another press conference to announce further details into ongoing anti-corruption investigations, planned for Thursday, had been postponed. "We do not have any information to release to the public at this time," said a prosecution spokesman.
The latest word from authorities is that a press conference will be held at the conclusion of the investigations to provide more information to the public. Public prosecutors said investigations were still in the preliminary phase and that police were looking into the alleged financial improprieties.
The Dubai arrests started in April, when Zack Shahin, chief executive of Deyaar Development, was detained over allegations of "financial mishandling"; he subsequently resigned, along with two more Deyaar boardroom members. Mr Shahin denies any improprieties.
Days later the probe spread to other companies, with the managing director of advertising agency Masterbrand detained over allegations of embezzlement at Deyaar; while officials at Dubai Islamic Bank, JPMorgan Chase and property developer Sama Dubai were arrested, as well as the former chief executive of mortgage provider Tamweel. All of the companies that they are not under investigation and the charges against the executives will not affect their performance.
Some investors and analysts say the wave of investigations may bolster the credibility and integrity of the emirate's regulatory framework, legal structure and business culture. In the shorter term, though, the investigations and a legal process that shrouds information from the public has created just the sort of uncertainty most investors strive to avoid.
Ingmar Burgardt, regional managing director of BHF Bank, has around Dh2.2 billion invested in the UAE. He said he immediately sells any shares of the companies whose executives have been accused of wrongdoing. He doesn't even consider whether the accusations might affect the performance of the company: "It's our investors' portfolio and we have to be careful that we only take market risks and don't get involved in any company collapse."
Markets rose yesterday. The DFM was up more than two per cent, recovering earlier losses. After falling earlier in the week, Emaar bounced back by 5.67 per cent. Tamweel was also one of the leaders, rising by 5.18 per cent.
But the investigations have weighed on UAE markets in recent weeks, especially the shares of property companies.
From April 16 until yesterday, the main listed companies whose executives have been accused in the investigations have seen their share prices plunge. Deyaar has fallen from Dh2.35 to Dh1.88; Dubai Investment Bank is now at Dh7.19 after touching Dh9.5 in April; and Tamweel hit Dh5.89 after reaching Dh7.45 on the day the first arrest was made.
Overall the property and construction sector on the Dubai Financial Market has fallen by 14.4 per cent since the allegations and arrests started in April; the Abu Dhabi stock market's property sector has fallen in value by 19.53 per cent; and DFM materials companies have plunged by 28.07 per cent.The DFM has fallen 12.93 per cent in that time and the ADX 10.62 per cent.
It is not just allegations of corruption hurting the local markets. Foreign investors have generally been pulling back from emerging markets; they have been heavy net sellers on local exchanges. Meanwhile, a regulatory change in the Saudi Arabian exchange, the Tadawul, has opened to foreigners for the first time, encouraging some investors to pull money out of other GCC markets to allocate more to Saudi.
Mohamed Ibrahim, a market analyst at the National Investor, said institutional investors might simply wait until the investigations run their course before making any decisions. "With institutions, you can expect the arrests to be very disheartening and a blow to confidence, especially as the UAE has been trying to sell the market and the region as the opposite of this," he said.
Many are unlikely to expand their positions just around Ramadan.
While international investors have indeed been taking capital out of the GCC over the summer and moving it to seemingly safer shores, Mr Burgardt said there has also been intra-GCC movement which has hurt the UAE.
For example the Saudi Tadawul market's decision to allow foreign investors prompted a shift in capital between the countries, leaving the UAE and entering Saudi Arabia.
Institutional investors have apparently held on to their positions much longer, according to Mr Burgardt. One large financial services firm he had been talking to was concerned about the size of the market crash because its next investment committee meeting was not until after Ramadan, so was unable to make any moves until then.
Yesterday traders attributed the market bounce to bargain hunters moving in to acquire shares at attractive valuations.
@Email:afoxwell@thenational.ae
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
The 12
England
Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur
Italy
AC Milan, Inter Milan, Juventus
Spain
Atletico Madrid, Barcelona, Real Madrid
The figures behind the event
1) More than 300 in-house cleaning crew
2) 165 staff assigned to sanitise public areas throughout the show
3) 1,000 social distancing stickers
4) 809 hand sanitiser dispensers placed throughout the venue
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
Creator: Lauren LeFranc
Rating: 4/5
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
Prop idols
Girls full-contact rugby may be in its infancy in the Middle East, but there are already a number of role models for players to look up to.
Sophie Shams (Dubai Exiles mini, England sevens international)
An Emirati student who is blazing a trail in rugby. She first learnt the game at Dubai Exiles and captained her JESS Primary school team. After going to study geophysics at university in the UK, she scored a sensational try in a cup final at Twickenham. She has played for England sevens, and is now contracted to top Premiership club Saracens.
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Seren Gough-Walters (Sharjah Wanderers mini, Wales rugby league international)
Few players anywhere will have taken a more circuitous route to playing rugby on Sky Sports. Gough-Walters was born in Al Wasl Hospital in Dubai, raised in Sharjah, did not take up rugby seriously till she was 15, has a master’s in global governance and ethics, and once worked as an immigration officer at the British Embassy in Abu Dhabi. In the summer of 2021 she played for Wales against England in rugby league, in a match that was broadcast live on TV.
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Erin King (Dubai Hurricanes mini, Ireland sevens international)
Aged five, Australia-born King went to Dubai Hurricanes training at The Sevens with her brothers. She immediately struck up a deep affection for rugby. She returned to the city at the end of last year to play at the Dubai Rugby Sevens in the colours of Ireland in the Women’s World Series tournament on Pitch 1.
The specs: 2018 BMW R nineT Scrambler
Price, base / as tested Dh57,000
Engine 1,170cc air/oil-cooled flat twin four-stroke engine
Transmission Six-speed gearbox
Power 110hp) @ 7,750rpm
Torque 116Nm @ 6,000rpm
Fuel economy, combined 5.3L / 100km
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Vaccine Progress in the Middle East
Abu Dhabi racecard
5pm: Maiden (Purebred Arabians); Dh80,000; 1,400m.
5.30pm: Maiden (PA); Dh80,00; 1,400m.
6pm: Sheikh Zayed bin Sultan Al Nahyan National Day Cup (PA); Group 3; Dh500,000; 1,600m.
6.30pm: Sheikh Zayed bin Sultan Al Nahyan National Day Cup (Thoroughbred); Listed; Dh380,000; 1,600m
7pm: Wathba Stallions Cup for Private Owners Handicap (PA); Dh70,000; 1,400m.
7.30pm: Handicap (PA); Dh80,000; 1,600m
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
More Expo 2020 Dubai pavilions:
Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
INDIA SQUAD
Virat Kohli (capt), Rohit Sharma, Shikhar Dhawan, KL Rahul, Vijay Shankar, MS Dhoni (wk), Kedar Jadhav, Dinesh Karthik, Yuzvendra Chahal, Kuldeep Yadav, Bhuvneshwar Kumar, Jasprit Bumrah, Hardik Pandya, Ravindra Jadeja, Mohammed Shami
SPEC%20SHEET%3A%20SAMSUNG%20GALAXY%20Z%20FLIP%204
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UNSC Elections 2022-23
Seats open:
- Two for Africa Group
- One for Asia-Pacific Group (traditionally Arab state or Tunisia)
- One for Latin America and Caribbean Group
- One for Eastern Europe Group
Countries so far running:
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