The UAE's banking sector is poised to reap the benefits of increasing trade flows with Asia and other developing markets, said Haytham El Maayergi, Standard Chartered's head of transaction banking for the UAE.
Standard Chartered bank on Najda Street in Abu Dhabi. Silvia Razgova / The National
Standard Chartered bank on Najda Street in Abu Dhabi. Silvia Razgova / The National
The UAE's banking sector is poised to reap the benefits of increasing trade flows with Asia and other developing markets, said Haytham El Maayergi, Standard Chartered's head of transaction banking for the UAE.

Standard Chartered forecasts emerging market trade to account for more than 30 per cent of global trade volumes by 2030. Emerging market trade corridors are expected to account for 40 per cent of global trade by 2030, up from 18 per cent last year.

"Flows both within and from emerging markets will continue to grow, and the UAE . is well positioned to tap this shift from West to East," said Mr El Maayergi.

Recent GDP growth in emerging and developing markets has far exceeded that of G7 countries, leading to a growing middle class with disposable incomes and an increased appetite for foreign goods. Trade flows have grown rapidly as GDP in emerging and developing markets expanded by 31.4 per cent between 2008 and 2011, compared with just 5.3 per cent for G7 countries during the same period.

Trade flows between China and the rest of the world have proved particularly robust, growing to US$3.87 trillion last year. Particularly impressive has been the performance of renminbi trade settlement, which has grown since its launch three years ago to 5.53tn yuan (Dh3.32tn) last year.

"The UAE has great potential to lead the Middle East and North Africa as a regional hub for the offshore renminbi trade," said Mr El Maayergi. "It's a natural trading hub, it's a regional financial centre and it has the right legal environment. It also has a strategic location between the other renminbi hubs of Hong Kong and potentially London."

Trade between China and the UAE has increased tenfold over the past decade, reaching $15.6 billion last year, a year-on-year increase of 10 per cent. The increase follows a 35bn yuan currency swap agreement between the two countries, the first such agreement China has made in the Middle East.

The UAE recently overtook Saudi Arabia as the region's top trading partner with Singapore, as trade between the two countries grew by 25 per cent between 2011 and last year.

Asian banks are increasingly seeking to establish a presence in the UAE as local lenders look for new opportunities in Asia, said Timucin Engin, an associate director at the ratings agency Standard & Poor's.

"If you look at new registrations in the DIFC in the past 12 to 18 months, you'll see a large number of Asian banks setting up shop," Mr El Maayergi said. "There's a fairly large amount of business between Asia and the GCC region, so we're seeing the GCC banks opening businesses in Singapore and Hong Kong, so they can tap into this."

Mr El Maayergi was speaking in the run-up to Sibos, an international transaction banking conference organised by the international banking service provider Swift. The 35th annual conference will be held next week in Dubai from Monday to Thursday. It will be the first time the event has been held in the Middle East.

Regional and international banks have been increasingly keen to boost their transaction banking services as a means of improving their liquidity positions over the past three years, said Mr El Maayerghi.

"There has been increasing recognition that the transaction banking business anchors client relationships while providing a stable source of liquidity," he said. "The cash business provides liquidity feedstock for the bank, reducing dependency on the wholesale funding markets."

Transaction services businesses have the additional advantage of being relatively inert, with business typically not retendered for many years, thereby providing a sticky source of liquidity, he said.

Transaction banking services account for 35 to 40 per cent of StanChart's wholesale banking business globally, with a similar proportion for its Middle Eastern operations, said Mr El Maayergi. The bank has the second largest volume of transactions in the Swift system behind HSBC.

jeverington@thenational.ae

Published: September 12, 2013 04:00 AM

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