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DFM receives strong response in New York

Fahmi Al Ghussein, executive director and head of MENA equities and distribution at Morgan Stanley — one of the event's sponsors — said the response to the event had been excellent. On the first day, which was open to individuals and institutions more than 300 institutions were present — a higher number than turned up for the DFM roadshow in London, he said. The second and third days were given over to one-to-one and exclusive meetings.

The DFM roadshow in the US provides an opportunity for investors to gain an insight into DFM listed companies' operational methods as well as their strengths and weaknesses, said Al Ghussein. He also added that although companies in the region have come under attack for their lack of transparency and poor corporate governance, practices are changing. "Corporates are seeing the benefits of being more transparent," he said. He also noted the extent to which the DFM had "deepened" over the past five years.

For investors, "emerging markets have become the big story", he continued, with the Middle East presenting "the next growth opportunity". Perhaps one good indication of this is number of MENA specific investment funds that are being launched. "Over the last few years we have seen (foreign) institutional investors setting up more MENA funds," he said, adding: "More US and European institutions are looking to take up opportunities."

All equities markets have their ups and downs but of emerging markets in particular Al Ghussein commented: "If investors "do their homework, the necessary due diligence and their valuations correctly they should get the right result." He also said that if equities markets in the Middle East are to develop further it is important to reduce the obstacles to foreign ownership. "The restrictions on foreign ownership is an obstacle to the development of the markets," he said, citing Saudi Arabia specifically. "It needs to lift foreign ownership limits."

The generally positive view of emerging markets expressed by Al Ghussein reinforces the conclusions reached in a Morgan Stanley report on emerging markets equity strategy distributed last week. It states: "In the medium to long term there is no change in our thesis that emerging markets are set to take centre stage in the global economy and financial markets." In December 2006 the investment bank identified five key themes and these, it says, are still relevant.

The themes are: the integration of emerging market (EM) labour into the global economy and the superior demographics of the EM world; a continued boom in infrastructure construction and energy demand in EM; a trend to further real exchange rate appreciation over the cycle and a continuing shift from external debtor to creditor position in most countries; the development of local yield curves, mortgage markets and pension systems; and further outsourcing and global and industrial services sector consolidation, with EM companies taking an increasing role as global industry leaders.

The report also notes that emerging markets including the Middle East account for 30 per cent of the global economy. "They have contributed almost half of all economic growth this year, more than four times the contribution of the US. China's contribution to global growth alone has exceeded that of the US for the first time ever," it states.

Another of the report's conclusions is that emerging market consumers are drivers of demand growth in product categories. In the auto sector for example China, India and Brazil — the three largest EM countries — collectively have end-use domestic auto sales amounting to 60 per cent of the quantity of autos shipped annually in the US, and this is growing at 26 per cent year on year.

One downside however is that economic growth in emerging markets is forecast to weaken next year. According to Morgan Stanley: "Potential simultaneous weakness in the US, eurozone and Japan is raising the risk if a negative external shock into emerging markets in 2008."