ARAB FINANCIAL FORUM NEWSLETTER JANUARY 2011.

ISSUE II

Arab Financial Forum Newsletter

Monitoring the latest news

Dear Reader,

Welcome to the latest Arab Financial Forum Newsletter!

World‟s attention is concentrated on recent developments in MENA region
followed by social revolts in Tunisia. This issue will reflect on recent economic
activities in Arab world touched by socio-political unrest in Tunisia.
It will talk about the impact of political instability in Tunisia on investment inflows
to MENA region, the effect of Egypt upraises on Stock Exchange Market in
Kuwait, the situation in credit rating in Tunisia itself, the attempt of Arab leaders to
find solution to economic problems, the main cause of riots, through Arab Social,
Economic and Development summit.
This newsletter‟s analysis and commentary includes the article called „MENA
Turmoil Highlights Sector Risks‟ by Will Jackson who is the deputy editor of Fund
Strategy magazine. The article describes the possible geopolitical risks in emerging
MENA markets and the concerns of western businesses about the risk of spread of
social unrest to MENA‟s large economies in spite of pro-democratic character of
the movements.
I hope you will enjoy this newsletter and look forward to hearing from you.
With warmest regards,
Aynur Hamidova

AFF Project manager

If you would like to learn more about this newsletter or forthcoming events, or would like to suggest
an event, article or include any comment for inclusion in the next edition. We welcome new readers,
if you would like to me to include new interest to our complimentary distribution of the newsletter,
please do not hesitate to contact me at projects@meconsult.co.uk.

MEC International Ltd. Granville House. 132-135 Sloane Street London SW1X 9AX
Tel: 020 7591 4816 Fax: 020 7591 4801 E-mail: projects@meconsult.co.uk
ARAB FINANCIAL FORUM NEWSLETTER
IN BRIEF
Gulf fund managers shift strategy in
Tunisia storm
21 January, 2011
Gulf funds spooked by the prospect of political
unrest in the region are reallocating money to
countries like Qatar and UAE because they are
seen as more stable.
Read more
Arab leaders propose $2 bln fund
Tunisia looms large over Arab
Economic Summit
19 January, 2011
A summit of Arab leaders opened in the Red
Sea resort of Sharm el-Sheikh on Wednesday to
discuss the region's economies, in the first high-
level Arab gathering since a popular uprising in
Tunisia, AFP reported.
Read more
Kuwait Stock Exchange affected by
developments in Egypt
30 january, 2011
Kuwaiti economists unanimously agreed here
Saturday that the retreat that Kuwait Stock
JANUARY 2011. ISSUE II
Exchange (KSE) saw as well as other Gulf
Cooperation Council (GCC) and world stock
markets is due to the psychological impact
upon some investors and traders because of
unstable conditions in Egypt.
Read more
Saad Hariri Government Collapse -
Negative Effects on Lebanese Banks
17 January, 2011
The collapse of Lebanese government with
resignation of 11 ministers sympathetic to
Hezbollah has a negative impact for Lebanon‟s
banks as it brings into question the country‟s
2011 economic growth prospects.
Read more
Tunisia's credit rating downgraded by
Moody's
Tunisia's credit rating has been cut by rating
agency Moody's because of the continuing
unrest in the country.
Read more
Denies reports Ben Ali & wife fled
with 1.5 tons of gold
Tunisia's central bank says gold
stocks unchanged
21 January, 2011
Tunisia's central bank denied again Friday that
the ousted president and his wife fled last week
ARAB FINANCIAL FORUM NEWSLETTER JANUARY, 2011. ISSUE II

with 1.5 tons of gold, after an industry report Economist: Morocco's financial sector
indicated this amount was missing from its among best in Africa
reserves.

Read more 25 January, 2011

In a $230 mln package to

International leading think tank, the Economist
preemptively prevent riots
Intelligence Unit (EIU), highlighted in recently
Jordan cuts food & fuel prices, and published report the dynamism of Morocco's
creates govt jobs financial sector, considering it as one of the
best in Africa.
13 January, 2011

Read more
Jordan approved around $230 million package
to reduce prices of commodities and to create
jobs in an attempt to aid the country‟s poor and
Dubai real estate deals down 65% in
mitigate rising popular discontent, a newspaper 2010
reported on Thursday.
24 January, 2011
Read more

Qatar, Canada Enhancing Energy and

Industry Cooperation
26 January, 2011

The total value of real estate deals in Dubai

plunged 65 percent in 2010 as new supply
squeezed market prices, a new report has said.

Read more
HE the Minister of Energy and Industry Dr.
Mohammed bin Saleh Al Sada met with Iris
Evans, Minister of International Relations at the
Heritage Oil hit by disappointment
Government of Canadian Alberta State to over gas find
discuss the joint cooperation in energy and
26 January, 2011
industry sectors.
Heritage Oil said it discovered a major gas field
Read more
but not oil in the Kurdistan region of Iraq,
pulling shares in the company down by 18
percent on Wednesday.

Read more
ARAB FINANCIAL FORUM NEWSLETTER
Jordan attracting $ 14 billion
investments in energy infrastructure
31 January 2011
Jordan hopes to attract $14bn in investments in
energy infrastructure, including the
construction of a nuclear reactor scheduled to
come on stream in 2018, and efforts focused on
developing renewable and oil shale, Global
Arab Network reports according to OBG.
Read more
COMMENTARY
AND ANALYSIS
‘MENA Turmoil Highlights Sector Risk’: This piece
was contributed by Will Jackson the deputy editor
of Fund Strategy magazine.
The troubles in Egypt and Tunisia are a sharp
reminder for emerging market investors of
uncertainties in the region, which include
currency and regulatory as well as political
risks.
Investors who were bold enough to venture into
emerging market equities after the technology,
media and telecoms (TMT) bubble of the late
1990s have been well-rewarded. The MSCI
Emerging Markets index returned about 250%
over the past decade according to Financial
Express, compared with 15% from developed
world stocks. This out-performance triggered a
surge of interest in the region, and inflows into
emerging market funds.
Data published last week by the Investment
Management Association (IMA) showed that
British retail investors ploughed almost £1.7
billion into the Global Emerging Markets sector
in 2010, more than in the previous six years
combined. Sales reached a peak in November
as net inflows hit £337m - the highest monthly
amount on record - before falling back to
£135m in December.
JANUARY, 2011. ISSUE II
But turmoil in the Middle East and North
Africa (Mena) region has forced investors to
confront the geopolitical risks attached to
emerging market exposure. Democrats around
the world may have welcomed the
demonstrations in Cairo, but stock markets
were less enthusiastic - Egyptian equities fell
by about 15% in late January and early
February.
The Egyptian protests were inspired by similar
actions in Tunisia, which toppled the country‟s
long-standing president, Zine el-Abidine Ben
Ali. By the middle of last week, Jordan and
Yemen had responded quickly to mass protests
with political reforms, but uncertainty
surrounded the potential impact of pro-
democracy demonstrations planned for Algeria,
Bahrain and Syria. Commentators speculated
that the unrest could spread to Saudi Arabia -
the MENA region‟s largest economy.
“Events in Tunisia and Egypt have shocked
investors in terms of the sheer speed of
movement around a political environment that
has, in some cases, been set in stone for a
generation,” wrote Bill O‟Neill, Merrill Lynch
Wealth Management‟s chief in- vestment
officer for Europe, the Middle East and Africa.
“Once again we are reminded that developing
economies carry political risk linked to, at
times, traumatic social change.”
Adviser Fund Index (AFI) panellists say they
largely rely on emerging market fund managers
to make calls on geopolitical risk. “It is not
something that we target specifically,” says
Shauna Bevan, an investment manager at
Charles Stanley. “We do not necessarily avoid
[countries where political risk is high] but we
make sure we are compensated for those risks.”
ARAB FINANCIAL FORUM NEWSLETTER JANUARY, 2011. ISSUE II

James Calder, the research director at City
Asset Management, also expects higher returns
as recompense for the additional risks in
developing stock markets. However Calder
notes that most emerging market managers
have a low exposure to MENA countries and he
expects the long-term impact on equity
valuations to be muted.
“There are short-term worries over food price
inflation and demographics - large,
underemployed workforces in the MENA
region are a problem,” he says. “But we are still
reasonably positive on the emerging markets.”
Calder favors South East Asia in particular,
alongside Latin America and Eastern Europe.
Political tensions are more pronounced in
MENA countries than elsewhere in the
emerging world, he adds.
Bevan, Calder and Lowcock prefer portfolios
with broad emerging market exposure and
largely avoid region and country-specific
strategies, including MENA funds. All three
panellists recommend products managed by
Aber- deen and First State. Calder also uses
funds run by Nordea and Lazard; Lowcock fav-
ours Henderson, Fidelity and JP Morgan Asset
Management.
For the latest updates please access our
website:
http://www.arabfinancialforum.org/
If you would like to learn more about this
newsletter or our forthcoming events, or would
like to suggest an event or article for inclusion in
the next edition, please do not hesitate to contact
me at projects@meconsult.co.uk.

MEC International Ltd.

Granville House
132-135 Sloane Street
London SW1X 9AX
Tel: 020 7591 4816
Fax: 020 7591 4801
E-mail: projects@meconsult.com

Adrian Lowcock, a senior investment adviser at

Bestinvest, says geopolitical risk is only one of
the factors emerging market investors have to
consider. He recommends a maximum
allocation of 10% in emerging and just 1-2% in
smaller “frontier” markets.

“There‟s political risk, currency risk and

regulatory risk,” Lowcock says. “Companies
that do business in Brazil do not necessarily
have the same policies and processes that a
similar company would have in America, for
example. They probably won‟t have the same
shareholder rights. Investing in emerging
markets by its very nature will always be
risky.”