Fear of new pressure on Mena region
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Asset managers fear that markets in the Middle East and North Africa (Mena) region will come under further selling pressure, after Dubai World, a state-owned holding company, announced its intention last week to ask creditors for a delay in the repayment of debts.
“Emerging currencies and the credit market have been hit,” says Ghadir Abu Leil-Cooper (pictured), the head of emerging Europe, Middle East and Africa equities at Baring Asset Management. “Equity markets have also reacted negatively, with falls seen across developed and developing markets.
“For this to reverse and sentiment towards these markets to recover, market participants will need to see details of the restructuring, and also clarification of the level of banks’ exposure,” Leil-Cooper says. (continues below)
Investec Asset Management says its equity exposure to the United Arab Emirates and the Dubai equity market is not causing concern at a portfolio risk level.
“Our exposure in the Africa Middle East fund is based on rigorous fundamental analysis at a stock-specific level and high risk premia are incorporated in our valuations,” the group says.
“Emerging currencies and the credit market have been hit”
Ghadir Leil-Cooper
Julian Jessop, the chief international economist at Capital Economics, says Dubai’s problems are a long overdue consequence of the bursting of the global property bubble rather than the start of a new financial crisis.
“Nonetheless, they are a timely reminder that the legacy of past excesses in heavily-indebted economies will linger for many years to come,” Jessop says.
