MENA Market Overview November 2017

Following our recent trip to Dubai and Riyadh, we wanted to share a few insights from the financial services landscape in the region:

Overview

  • The changing regulatory environment in Saudi Arabia, with MSCI upgrade and FTSE listing expected in 2018, is attracting interest from international investment banks, who have previously been undercut on pricing from the Tadawul listings. With access to international investors likely to become paramount, international banks are set to make significant inroads into the market

  • Given the above, the privatisation agenda being pursued in Saudi Arabia as part of Vision 2030 has attracted significant interest from bulge bracket platforms in the region. Net new headcount has been created within IBD Coverage teams at Citi, Goldman Sachs, HSBC and Morgan Stanley, amongst others, in order to gain better access to the market from individuals based on the ground in Riyadh

  • Despite opening up to Qualified Foreign Investors and the impending FTSE and MSCI upgrades, equity markets have seen some of their lowest level of flows in Saudi Arabia for many years. With the reform process aimed at long term goals, the short term impact has seen weakness in the local economy, with the fundamentals of companies dependent on consumer spend particularly effected. International institutional investors are waiting for next year’s changes before committing to investing heavily in the Saudi reform story

  • Capital markets activity is returning across the region, with the Emaar Development and ADNOC IPOs currently in the market, the former being the first major IPO in three years from Dubai. With privatisation processes in Saudi Arabia and Egypt creating a pipeline of ECM transactions for 2018, banks are looking to boost their ECM product expertise in the Middle East

Hiring Trends

  • Saudi Arabia has been the growth market for international investment banks in 2017, with banks such as Citi and Goldman Sachs hiring Heads of Investment Banking in Riyadh, while Goldman have established a wholly-owned local brokerage for the first time, hiring Mohammad AL AWAD as Head of Equities. Both sovereign entities/GREs such as the PIF and Dussur and leading private institutions such as Jadwa, have driven hiring on the buy-side. The inevitable consequence of this demand and the limited supply has been to drive up price points for compensation in Riyadh

  • The thread that binds all the above hiring, is the priority put on hiring Saudi nationals into these roles. Regulatory requirements (Nitaqat) require financial institutions with between 10 - 49 employees to have a Saudisation percentage of at least 88% to qualify for platinum status, up from 80% as of September this year

  • In Dubai, international boutique advisory franchises have been the most active hirers, with new market entrants Evercore and Houlihan Lokey notably approaching bulge bracket bankers in an attempt to gain market share from long established platforms such as Rothschild and Moelis

  • Equity hiring has been minimal in the region, despite anticipation of growth in primary activity and secondary markets from the MSCI and FTSE upgrades. With the attention of European management firmly on MiFID II, the potential influx of investors into the Saudi market has not been mirrored by a pick-up in hiring activity

Local Coverage v Offshore Access

  • Coverage models are varying across different platforms as to how best to access each market in different product areas. Wealth management platforms such as Credit Suisse have boosted their presence in Saudi Arabia in order to provide clients with local booking capabilities, hiring the likes of Abdullah BASHMAKKH, previously Ashmore’s Head of Business Development in Riyadh

For the Delta house view and related mandates please reach out to Julian Cosby

Best Regards,

Delta Executive Search Team

Posted by Julian Cosby
Tuesday 21st November, 2017

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