Ah, the joy of being right. I made four predictions in this column at the end of last year, and I feel entitled to claim 75 per cent accuracy in my crystal-ball gazing. That’s rather better than my 2013 success rate, which I calculated at 62.5 per cent. Stick with me, dear reader, the trend is clearly up.
A quick run through the past year’s achievements. I forecast that Dubai International Capital would sell at last one of its flagship European investments, and was proved right when it realised a massive $1.7 billion on the disposal of its Mauser business in August.
Next I said that Shuaa Capital, the oldest investment bank in the region, would return to profit after several years of losses. Actually it did it rather sooner than I anticipated, with a small positive return for the financial year 2013. But the recovery accelerated this year. It declared a net profit of more than Dh40 million in the first nine months, allowing chairman Sheikh Maktoum bin Hasher Al Maktoum to stand down “mission accomplished”.
Then I said that Dubai’s financial restructuring would speed up as the emirate gets to grips with the funding requirements for Expo 2020. The two big events in this respect were the refinancing of $20bn of debts to Abu Dhabi entities, and the deal to reschedule Dubai Holding’s $15bn of debts to banks. The first was done in March, the second has been approved by creditors.
My final prediction is the only one where a sceptic could argue the finer points. I said that Abu Dhabi Global Market (ADGM) would have “the foundations in place for a powerful financial marketplace”, and I believe that has been proved right. There have been high profile executive hirings and regulatory developments that represent real progress in the long-term goal of creating a regional financial hub.
But maybe I was jumping the gun a bit. The foundations are there certainly, but, reflecting Abu Dhabi’s cautious, careful approach, the ADGM is still a few months off from welcoming its first financial firm. So I claim half right, but see prediction 4 below.
Emboldened by my success in 2014, here are my forecasts for 2015, a year that promises to be rather more difficult to call. But here we go:
1. Oil will recover to around the $75 to $80 per barrel level by the end of the year. Given that predicting oil price movements is the economics equivalent of the holy grail, this is a big gamble. But I believe the recent falls are unsustainable even in the medium term. The stimulus cheap energy gives to the global economy will increase output in Asia and elsewhere, while the United States economy is growing again. Some shale and deepwater projects will be uneconomic at present levels, leading to increased demand for the Arabian Gulf’s low-cost product.
2. Al Habtoor IPO. If oil was difficult, this is just as hard, but I believe 2015 will be the year Al Habtoor group, one of the region’s leading family businesses, will finally go for a market listing. Founder Khalaf Al Habtoor has been thinking about this for years. His is a finely-balanced call, but, assuming a period of relative calm in local markets and an end to the oil carnage, he will go for it, later in the new year.
3. Dubai will seek a rating for its sovereign debt. This has been one of the anomalies of the financial scene for years. Many big Dubai entities have ratings and enjoy the benefits in terms of access to cheaper debt. The emirate, gearing up for the big financial requirements of Expo 2020 investment, will have a rethink on this, and see the attractions of a big sovereign issue endorsed by the ratings’ agencies.
4. Finally, ADGM will reach “critical mass” about the middle if 2015, and will be in a position to announce its first financial member. The market, ploughing a furrow initially in private banking, wealth and asset management, will also name an executive for the important role of head of the independent court system, a centrepiece of the market vital to attract big global participants.
There they are. If wrong, I plead unforeseeable circumstance. If right, I will accept, indeed expect, applause by email.
fkane@thenational.ae
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