Fadi Al Assaad / Reuters
Fadi Al Assaad / Reuters

Business

Qatar riyal trading falls dramatically amid GCC dispute, say traders

While pegged to the US dollar, trading has been volatile.

Mahmoud Kassem

June 28, 2017

Trading in Qatar’s riyal in the UAE has dropped significantly since the GCC dispute erupted earlier this month, according to foreign exchange dealers.

While most of the big exchange houses in the UAE continue to have the capacity to deal in the Qatari riyal some of the smaller companies have stopped as the volumes traded do not make it worth their while, a source said.

“The flow has gone down substantially,” said an executive at a UAE foreign exchange house who did not want to be named. “We expect trade in the Qatari riyal to remain subdued.”

The executive said that the exchange house was now trading between 100,000 (Dh99,877) to 150,000 riyals a day, whereas before the crisis began they were trading a couple of million Qatari riyals a day.

The UAE, Saudi Arabia, Bahrain and Egypt on June 5 broke off diplomatic and trade ties with Qatar and stopped air, sea and land access to the country over Doha’s support for “terrorist groups aiming to destabilise the region”.

The Qatari riyal is pegged to the US dollar but it has still been volatile in trading since as traders struggled to fill orders amid poor liquidity with some banks unwilling to do business on the currency, according to Reuters. A gap has grown between the ­onshore and offshore trade of the riyal.

The decline in the volume of trade in the riyal comes after Qatari nationals were asked to leave the UAE.

Property brokers in Dubai this month reported a rush in sales from Qatari investors attempting to get their assets out of the UAE before the deadline to leave the country.

Brokers said property portfolios worth millions of dirhams were sold at steep discounts as Qataris rushed to liquidate their assets and leave.

Twelve-month Qatari forwards, which currency traders are forecasting the riyal to be trading against the dollar in a year’s time, pared gains they have been making. On Tuesday, 12-month forwards on the Qatari riyal fell 1.6 per cent to 3.8 riyals against the US dollar. Forwards on the riyal shot up to as much as 3.86 riyals per dollar in the aftermath of the crisis and were trading at 3.65 before the spat. In the spot market yesterday, the dollar was trading at 3.68 riyals.

mkassem@thenational.ae

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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To protect high-value strategic sites, such as airfields or population centres.

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THAAD can target projectiles inside and outside the Earth's atmosphere, at an altitude of 150 kilometres above the Earth's surface.

Creators:

Lockheed Martin was originally granted the contract to develop the system in 1992. Defence company Raytheon sub-contracts to develop other major parts of the system, such as ground-based radar.

UAE and THAAD:

In 2011, the UAE became the first country outside of the US to buy two THAAD missile defence systems. It then stationed them in 2016, becoming the first Gulf country to do so.

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Former Tory deputy chairman Lee Anderson became its first MP after defecting in March 2024.

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