Page 232 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

214 Dubai & Co.

serious market correction brought valuations closer in line with
global and historical standards. Some sectors—most notably real
estate—have enjoyed a more sustained boom that many expect will
cool down (if not crash) before the decade is out. Although
investors—especially the most sophisticated ones—still place the
vast majority of their assets abroad, increasing their focus on local
markets has had a transformative effect on asset values in the region.
The rise of Islamic finance—financial services conducted in
accordance with Islamic guidelines—has been a major trend in Gulf
markets. The Islamic financial services sector has been a key growth
area within the broader financial services industry, has captured a
large percentage of total assets and market share, and has attracted
the attention of major global institutions like HSBC, Citigroup,
Deutsche Bank, and many others. Developing Sharia-compliant
(conforming with Islamic law) products is an important capability
for any financial institution interested in building a large-scale busi-
ness in the GCC countries.
Multinationals can increasingly look to the GCC states as a
source of investment capital, and the savviest firms already do so.
No investment banking or private equity capital-raising campaign
can be considered truly global without including a stop or two in
the Gulf. In the biggest IPO in history—that of a Chinese bank—the
single largest investor was the Kuwait Investment Authority. Major
multinationals increasingly court GCC institutional investors for
both equity and debt financing. Some Western institutions have
structured financing deals in a Sharia-compliant way in order to tap
a broader pool of capital. As regulatory environments in the Gulf,
London, and elsewhere increasingly accommodate Islamic finance,
Sharia-compliant investors will be more central on the global stage.
Savvy firms cannot overlook the GCC in their global capital
strategy. The Gulf is more than able to fund local joint ventures and
subsidiaries on regional exchanges that are more flexible than ever
before. Gulf companies and investors have also become major
players in global mergers, acquisitions, and buyout situations. In
May 2007, for example, the Saudi chemicals firm SABIC prevailed
over several other bidders to acquire GE’s multibillion-dollar plas-
tics business. GE is not the first—and certainly not the last—
multinational to find itself across the table from a Gulf buyer when
negotiating a major transaction.