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24 hours in Dubai: A conversation with SunGard

Mon, 05 Dec 2011 07:16:00 GMT

Buy to the roar of cannons; sell to the sound of trumpets – Lord Nathan Rothschild, 1810

SungardThis is the poignant Wall Street adage that Abdulhadi Shahadah, CIO for HSBC Saudi Arabia, used when summarising his presentation during a SunGard Dubai City Day event on 23 November. But the pessimism for the next year is palpable. Most market participants in the Gulf Cooperation Council (GCC) of Arab States have the same story – things are slow, likely will be slow next year, expect improvement in 2013.

That 2012 is expected to be another lost year for investment is certainly the narrative in Europe as well. Across the board, economists are revising growth downwards and announcing the arrival of a European-wide recession.
But the context behind this lost year is vastly different for the two regions. While European governments struggle to find a resolution to a seemingly never-ending debt crisis and raise revenues, the oil-rich countries in the Middle East are struggling with attracting liquidity to markets amid the turmoil.

The stark contrast to Europe is further highlighted by some key statistics: GDP growth in the GCC is expected at 7.2 per cent this year, while its debt as a percentage of GDP is at 12 per cent, according to Standard Chartered research. Notably, some Middle Eastern markets are looking at an imminent upgrade to emerging market status but with Western investors’ priorities focused on survival mode, what impact this might have in the near-term remains in question. Qatar is a prime example. The country’s economy is booming, hundreds of billions is expected in investment leading up to the FIFA World Cup in 2022 and IPOs are highly anticipated on at least some portion of the assets held by its sovereign wealth fund, the QIA. Qatar Airways and Al Jazeera are likely candidates.

At a panel discussion, Qatar Exchange’s COO Olivier Gueris detailed the region’s difficult market conditions in spite of this boom - dissatisfying volatile trade in extremely shallow liquidity and with low volumes. At the same time, there is a high rate of account opening requests from international investors such as hedge funds and fund managers coming under the custody of HSBC, which he says will hopefully lead to trade when market conditions improve though this is unlikely to happen next year. “It is not a secret that trading has shrunk over here and we need short selling, we need liquidity mechanisms. At the moment, the closest things we have are ETFs,” says Wissam Khoury, SunGard's Middle East managing director for financial systems. SunGard has been in the region since the 80's and Khoury himself has a history in the business of asset management. He notes that the theme for the conference- how to capitalise on the three concepts of transparency, efficiency and network – are increasingly relevant for hedge funds, mutual funds and global trading.

"If you are small and don't have a lot to invest in infrastructure, you still need to attract liquidity and get funds in. We have some disturbance in the area over here and as a result there is movement of money, when things are not going great in some country, money gets withdrawn and put somewhere else. You need to be ready to absorb that, and there is nothing worse than when systems can’t make that flow happen," he says.

Meanwhile, across the GCC, financial institutions are consolidating, be it banks or brokerage houses - "cutting out the fat" and searching for synergies, explains Khoury, adding that if an institution is not changing its strategy, particularly in preparation for diversification and hedging, then that market share will go to a firm that is more prepared.

It certainly seems that getting liquidity mechanisms up and running are firmly on the agenda. The UAE financial regulator, the Securities and Commodities Authority (SCA) is moving forward with regulations for short selling, securities lending, market making and liquidity provision which are currently in a public consultation period. The estimate from SCA officials pegs implementation somewhere after the second half next year. Still, some observers question this timeline saying that things happen slowly in the Middle East and put forward their own estimates of at least one year.

Whatever the case, even if the Emirates do not bring in these regulations, they are sure to be implemented elsewhere, and that could be Egypt for example, Khoury notes.

Which brings the discussion to another prevalent theme at the conference - the continuing volatility in Egypt. Though Dubai has benefited from uprisings in Bahrain as businesses move to the stabler region, at the same time, Egypt remains a major risk factor - a point not lost during the many different presentations and discussions.

"Egypt is a big economy with a population of 80-plus million. The market is complex and very active and companies here [in the Middle East] have huge exposure to Egypt, whether it is an office there or a good revenue stream from there," says Khoury. "Our Arab Spring took lots of time, Egypt is almost one year paralysed, and we are hoping for stabilisation to come soon."

It is this kind of impatience from youth demanding change and freedom that speakers during the opening conference session said requires "expectations management" considering the complicated nature of institutional reform.

The uncertainty amid this unrest is further underpinned by the ongoing eurozone debt crisis. On this point, Khoury references a keynote speech which asked the audience – what does globalisation mean?

“Even if you are trying to be immune from the euro or Europe and despite being wealthy oil nations – who are our counterparties? They can be Greek and Spanish banks and if they get hit, then we are going to get hit as well. We cannot insulate ourselves totally and the volatility in the FX market is very important…. we are so much interrelated that this will impact us,” Khoury says.

Still, as a vendor, SunGard sees the opportunity to invest in human resources and infrastructure, but only if as a business there is some certainty of survival throughout this next intense phase of the financial crisis. It is this latter certainty that is most important for firms currently considering any upgrades to face the demands of a modern emerging market, after all, the Middle East is still better off than European and American economies and will likely remain so while oil holds current elevated levels.

“One of the criteria which will be important for [foreign investors] to take into account is that we have solid foundations... look at what we are doing in an open minded way and…get closer to understanding better what Middle East businesses want and you will find opportunities,” he says.

Anna Reitman is a freelance journalist based in the UK. You can visit her website here.

SungardSunGard is one of the world’s leading software and technology services companies. SunGard has more than 20,000 employees and serves over 25,000 customers in more than 70 countries. SunGard provides software and processing solutions for financial services, education and the public sector. SunGard also provides disaster recovery services, managed IT services, information availability consulting services and business continuity management software. With annual revenue of about $5 billion, SunGard is ranked 434 on the Fortune 500 and is the largest privately held business software and IT services company. Look for us wherever the mission is critical.

Headquartered in Wayne, Pennsylvania, SunGard is composed of four businesses - Availability Services, Financial Systems, Higher Education and Public Sector - that provide technology services and infrastructure, and software and processing solutions.

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