4 minute read
A Broadly Positive Journey Ahead
Looking back on 2021, Rajesh Singhi Managing Director, Regional Head of M&A and Investment Banking at Standard Chartered Bank, notes that it has been a landmark year for deals with volumes matching all of 2020 by September this year, and when looking forward into the next twelve months, he surmises that some individually unique factors that will assist some of the larger GCC economies, while other will take longer to emerge from deficit
Rajesh Singhi Managing Director, Regional Head of M&A and Investment Banking at Standard Chartered Bank
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Describe 2021 from a regional banking and finance perspective, and what you feel was the markets’ most notable achievement.
Despite the uneven economic recovery, we have witnessed in different regions across the globe, and the supply-chain disruptions that became a common phenomenon, the industry witnessed several noticeable achievements throughout 2021.
One of the most notable of these achievements would be how well markets recovered from the deal activity slump that took place during the peak of the COVID-19 global pandemic. 2021 has been a landmark year for the region with year-to-date September deal volumes already comparable to the full year volumes of 2020. Year-to-date Mergers and Acquisition volumes recorded c.US 70 billion dollars, almost equivalent to the whole of the year in 2020. Growth in the equity capital market is even more astonishing with equity issuance up to the third quarter of 2021, more than doubling as compared to the same period last year. Sovereign and private entities alike continue to take advantage of the high liquidity currently available with debt and equity issuances.
Another noticeable achievement is the uptick in inbound mergers and acquisitions. At US 25 billion dollars year-to-date, deal volumes are close to double those of 2019. We have seen strong interest in the region from private
investors and financial sponsors, with the most prominent deal among them being the Aramco oil pipeline transaction where Standard Chartered Bank played a leading role.
What is your prediction for the state of the overall regional economy by the end of next year?
Our team of experts, at Standard Chartered Bank believe that central bank bond purchase tapering and rising expectations of policy rate hikes across the developed economies are signs of growing confidence in the recovery of the economy. As such, it is my belief that the economic recovery witnessed post the Covid-19 global pandemic in the region will continue on throughout 2022.
Furthermore, the strengthening in oil prices we are currently witnessing is expected to continue and this will definitely help the regional economies. Various GCC countries also have very high vaccination rates, with high-risk individuals also being offered booster shots, and so far, we have been able to avert another wave of Covid -19, unfortunately something which European countries have been unable to do in recent months.
It is worth noting that some regional economies have fared better than others. The pace of change we are seeing in the Kingdom of Saudi Arabia is unprecedented, while the United Arab Emirates continues to be the leader in attracting foreign capital investments into the region, especially with Expo 2020 currently taking place, which is one of the world’s biggest events, and that has attracted visitors from all over the globe. The United Arab Emirates non-oil business activity also recently jumped to a two-year high in October (according to IHS Markit’s Purchasing Managers Index) and the benefit of Expo 2020 is expected to be sustained into next year as well. Additionally, net zero and sustainability commitments from both the Kingdom of Saudi Arabia and the United Arab Emirates will continue to drive non-oil business and GDP growth.
The Qatari economy will also benefit from higher oil prices too, as well as from the FIFA 2022 world cup soccer championships, while the Kuwait, Oman and Bahrain economies are projected to remain in budget deficit throughout 2022 and up until 2023, albeit with lower deficits as compared to the peak of Covid19 pandemic.
Do you expect the pace of IPO’s, M&A, equity and debt issuance and general capital markets activity differ in 2022?
We do expect to see strong investment
AS SUCH, IT IS MY BELIEF THAT THE ECONOMIC RECOVERY WITNESSED IN THE REGION POST THE COVID-19 GLOBAL PANDEMIC, WILL CONTINUE THROUGHOUT 2022
banking volumes next year in 2022. At Standard Chartered Bank, we are in advanced stages of a number of high value deals which we hope to be announcing between now and the first half (H1) of next year. Government entities and Sovereign Wealth Funds are the driving force behind a number of marquee deals in the region and we expect them to continue to remain active in 2022.
However, it is worth highlighting that we believe sustainability deals will receive more attention in capital markets, especially following on from the recent COP26 event held in Glasgow, UK. Even though there is still much more to do on this front, the segment is witnessing more interest from financial sponsors with sustainability as a specific focus and we expect to see still more activity in this area.
As for the sectors that are expected to witness the most activity in a post Covid-19 pandemic world, ‘hard asset’ sectors with predictable cashflows will continue to attract investors. In addition, we expect to see consumer and technology sectors benefit and drive greater market activities, especially as the world continues to reopen.
However, higher than expected inflation rates, especially in the United States of America, leading to a hawkish Federal Reserve and the recent surge in Covid-19 cases, particularly the new Omicron variant, are potential headwinds for the industry going forward.
