GCC urged to set up onshore financial centres
Manama, March 5, 2014
The Gulf region must look into developing onshore financial centres to introduce further stability, said a leading expert at the Euromoney GCC Financial Forum in Bahrain.
Pacific Alternative Asset Management Company managing director and partner Alper Ince, speaking exclusively to the Gulf Daily News, our sister publication, said the Gulf economies and markets are strong relative to the current global market.
"Capital exporters should not be worried about the GCC market. The exposure to problem areas in emerging markets is limited," he stated.
According to Ince, the market reaction to tapering was rational "in the sense that it corrected some of the overbought areas".
However, he said, continued retail driven sell-off and panic selling created pockets of opportunity for companies that are listed in emerging markets (but have exposures in outside emerging markets) and cross-holding structures.
Economic Development Board chief economist Jarmo Kotilaine said cyclicality is an integral aspect of market economies adding that GCC capital exporters have been through many international crises before.
"The good news is that what goes down, eventually also comes up. Market corrections are often the best opportunity to buy. Also long-term investors should not be concerned about short-term volatility," he said.
"The growing global economy is always going to require many of the things that GCC investors have put their money in.
"GCC countries are increasingly investing within the region and the broader Middle East, helping to spur long-term non-oil growth and to aid diversification in oil-producing states," he added.
Kotilaine also said that GCC countries' status as capital exporters meant that the economies were less vulnerable to concerns over a 'sudden stop' when compared to those capital importers and none had faced any concerns over the stability of their currency pegs.
"On the other hand, the emergence of financial centres is a natural, organic process. As the regional economies continue to grow and diversify, having centres of excellence in financial services is likely to be an asset.
"Among other things, they can help in the process of further building a regional human capital base in this area," he said.
"For example, in Bahrain, the development of the financial sector has provided greater opportunities for businesses to access funding, provided individuals with the products and services to manage their wealth for the long term and generated more than 9,000 high-quality jobs for Bahrainis.
"The development of this sector has been helped by the cluster of different financial services, institutions providing education and training and connectivity across the region, helping to connect to demand from the growing GCC market," he said.-TradeArabia News Service