Business confidence and risk tolerance of investors across the Middle East is likely to take a positive turn by the first quarter of 2009, feels a top official of ING Investment Management, that is planning to start raising capital for its recently-launched equities fund from February this year.
The company, which launched its first equities fund for Mena markets in November, is tapping sectors like telecom and utilities and is expecting a change in investor sentiment next year.
"From investment point of view it is the correct time to invest. We are currently using seed capital. For distribution, we would wait and begin from February, when, we believe, the perception and risk tolerance of investors would change," Farah Foustok, Chief Investment Officer, ING Investment Management, Middle East, told Emirates Business.
The company sees huge opportunity in the Middle East and Foustok said economy cycle here is different than the rest of the world. Heavy government spending in infrastructure and low public debt would help the region come out of the current phase sooner than other economies.
"Recession has affected the investor sentiment. But in Middle East, it's a different economic cycle than the rest of the world. What drives these economies is government spending unlike, say, the United States where it is consumer spending. The government plans to continue investing heavily in infrastructure. They have the power to grow and they would be spending their way through recession."
Low level of public debt is another positive that goes to the favour of markets in this region. "The ratio of debt to GDP in UAE is only 21 per cent, whereas it is 61 per cent in case of the US, and emerging markets have it at 31 per cent," she added.
From investment point of view ING unit is considering companies with a government backing, cash rich businesses and those in sectors like utilities and telecom as attractive.
The recession has changed the scenario for all including fund managers, said the investment officer.
In 2009, they will have to understand the significance of transparency and good governance.
Investors have turned very cautious, she said.
For corporates, the new year would be a year of survival and cost cutting would be the key, though that does not imply cut in jobs. "Businesses will look at survival and this means there is a room for consolidations particularly in banking sector. Consolidations would help improve balance sheets."