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Middle East Emerges as Gulf of Financial Tranquility

June 24, 2008 03:17 PM
by Anne Szustek
Seemingly immune to the sub-prime crisis, the Persian Gulf is developing into a safe haven for international investors. The relationship is welcomed on both sides.

30-Second Summary

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Eager to tap into the region’s oil wealth in the wake of billions of dollars in losses from the credit crunch, Western financiers are heading to the countries of the Gulf Cooperation Council to set up shop and ply their asset management packages.

ING, Morgan Stanley, Merrill Lynch, Lehman Brothers and UBS have all sent top executives to Dubai to oversee expansion into the market. And NYSE Euronext, which oversees the New York Stock Exchange and several European trading floors, announced on Tuesday that it’s putting $250 million into the Doha Securities Market to establish a cash-and-derivatives exchange.

The investment equation is balanced on both ends.

Fifty years of oil income have left Gulf countries flush with cash and looking for tools to diversify their national treasuries. Real estate ventures—both home and abroad—as well as buy-ups of Western companies—are top destinations for oil funds, which are often state-owned. Sovereign wealth funds are often a conduit for Gulf-based money into Western markets—raising eyebrows among some politicians and analysts about their comparative opacity.

Some U.S. investors have expressed concerns about where their money is channeled once it’s invested in foreign holdings, prompting the creation of “terror-free” accounts. Columnist Richard Shaw of Seeking Alpha points out that legislation in Congress that would institute strict penalties for U.S. companies that conduct business with countries on the State Department’s state terror sponsors list could affect private investors with interests in countries as varied as China, Germany and the UAE—all of which have sizeable enterprises in Iran.

Headline Links: Western businesses taking stock in Gulf markets

Video: ‘Investing in the MENA Region’

Background: Economic history of the UAE

Opinion & Analysis: Perspectives on Gulf investment

Reference: FindingDulcinea’s Web Guide to Investing

Related Topics: Sovereign wealth funds, Gulf region real estate ventures

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