Dubai’s Arqaam Plans Asia, Africa Expansion as Rivals Go

Arqaam Capital Ltd., the Dubai-based investment bank which acquired financial companies in Libya and Egypt last year, said it’s considering expansion from Africa to southeast Asia as larger rivals scale back in emerging markets.

Arqaam is weighing acquisitions among options as it seeks to sustain compounded annual growth of about 35 percent, Chief Executive Officer Riad Meliti said in a Feb. 19 interview. The bank will add staff in Dubai, Cairo, Tripoli and Beirut and boost the number of companies covered to 140 from 98, he said.

Persian Gulf financial institutions are expanding as local markets rally, while Europe’s debt crisis prompts larger rivals including Credit Suisse Group AG, Nomura Holdings Inc. and Morgan Stanley to reduce staff. Dubai investment bank Al Mal Capital PSC’s Chairman Naser Nabulsi said this month he plans to increase employees by 20 percent as the recovery takes hold.

“Global institutions of developed markets are currently retrenching from their frontier and emerging-market bases, increasing the opportunity that we have in front of us today,” Arqaam’s Meliti said. “Managers of funds are embarking on an asset allocation shift from the developed world.”

Persian Gulf banks have pursued acquisitions in North Africa to gain access to more-populous nations such as Egypt as the countries undergo a political transition following so-called Arab Spring uprisings. Arqaam bought El Rashad Securities Brokerage SAE in Cairo in January last year. The benchmark EGX 30 Index rallied 51 percent in 2012, the world’s second-best performance among 93 gauges tracked by Bloomberg.

‘Critical Market’

“It was a critical market for us to have a presence on the ground, to produce research and add value to regional and international clientele to invest in the market,” Meliti said.

Arqaam also acquired Libya’s Al Rashad Finance and Management Advisory, where market access will accelerate as the nation pursues a democratic transition, he said.

Middle East and North Africa equities are poised to outperform emerging markets as higher dividends and state-funded expansion lure investors hunting for better returns, Franklin Templeton Investment Management Ltd. said in December.

Credit Suisse is cutting positions in Dubai as it moves its equities business to Riyadh, a person familiar with the matter said in December, while Morgan Stanley eliminated three equity positions in Dubai in January, according to a banker familiar with the matter. Nomura cut a third of its investment banking jobs in Dubai, including its investment bank head in the Middle East and North Africa, a person familiar said in September.

New Hire

Arqaam appointed former Credit Suisse banker Wafic Nsouli as head of institutional equity sales, the bank said today in an e-mailed statement. Prior to joining Arqaam, he was head of Middle East and North Africa equities at Credit Suisse, responsible for the bank’s Dubai and Saudi Arabia offices.

To be sure, many of the local banks count employees in the hundreds rather than thousands and have lower costs than larger rivals. Arqaam, for example, has grown to 110 employees since its creation five years ago, while Al Mal counts about 20.

Saudi Arabia’s Tadawul All Share Index rose less than 0.1 percent yesterday in Riyadh. Dubai’s DFM General Index advanced 1.2 percent to the highest close since November 2009, bringing this year’s gain to 20 percent, compared with a decline of 0.1 percent for the MSCI Emerging Markets Index. The emirate’s measure fell 0.1 percent as of 11:23 a.m. in Dubai today.

Before it's here, it's on the Bloomberg Terminal.