Franklin Templeton Investments, which manages about $377 billion in assets, increased its stake in Dubai's Algebra Capital to 40 percent on Monday and said it wanted to grow its business in the Middle East and North Africa.

Franklin Templeton, a unit of one of the largest publicly traded US mutual fund managers Franklin Resources, originally bought a 25 percent stake in the Dubai-based fund manager in Sept 2007, in the midst of an oil price rally that had left the world's top oil-exporting region flush with cash.

'This investment ... recognises the long-term opportunities in the (Middle East and North Africa),' William Yun, a Franklin Templeton Investments executive vice president, said in a statement.

A six-year oil price rally had enabled Gulf states to pour windfall oil revenues into projects designed to reduce their reliance on the volatile commodity, but the global financial crisis and decline in crude oil prices has since hit incomes.

Economists have slashed most Gulf growth forecasts since they were last polled in December and now expect global turmoil to hit non-oil sectors hard, especially in the United Arab Emirates, home to the former boomtown of Dubai.

Six analysts expect the UAE economy will contract this year.

The downturn is amplified in Dubai, where thousands of people have lost their jobs as real estate prices slump by a likely 38 percent this year, a Reuters poll showed this month.

Algebra CEO Ziad Makkawi told Reuters his firm was eyeing the bargains the crisis would eventually offer up.

'With the basic meltdown of the market and prices in the region and globally ... eventually as we had excesses on the way up we will see ones on the way down,' he said in a phone interview.

'In discussions with our investors, people are beginning to sniff around, but nobody is rushing in.'    

The two companies declined to disclose the value of the deal, which will see Yun join two other Franklin executives on Algebra's board.

Algebra and Franklin, which have launched five funds since 2007, will focus in the short-term on fixed income, Islamic bonds, healthcare in the private equity and eventually listed equities.

Algebra Capital is based in the Dubai International Financial Centre, a dollar-based, self-regulating investment zone the Gulf emirate set up in 2004 to attract financial services providers to the world's biggest oil-exporting region. - Reuters