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Brokerage Challenges…Regional Expertise Sixth Annual Palestine Capital Markets Forum Palestine – December 11, 2012 Waleed Al-Nassan.

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Presentation on theme: "Brokerage Challenges…Regional Expertise Sixth Annual Palestine Capital Markets Forum Palestine – December 11, 2012 Waleed Al-Nassan."— Presentation transcript:

1 Brokerage Challenges…Regional Expertise Sixth Annual Palestine Capital Markets Forum Palestine – December 11, 2012 Waleed Al-Nassan

2 Setting The Stage Global The world is coming out of the tech bubble. Strong global economic growth. Strongly developing real estate finance sector / Investment Banking Boom. Regional Continued strive for openness and deregulation. Increased levels of FDI across all Arab countries. American invasion of Iraq, (special impact on Levant region). Increased commodity prices, (especially oil towards the end for the period). 2

3 Global Beginnings of the meltdown of the US subprime mortgage market. Unfolding of the global financial crisis. Unprecedented declines in asset prices across all classes. Compete freeze in the global financial system. Regional Economies started to slow (especially non-hydrocarbon related ones). Lower levels of FDI into the region. Foreign portfolio investments pressured to leave the region. Real estate investment across the region starts to decelerate. Stock market valuations and volumes of trading reached very low levels. 3

4 Global economies are trying to deal with the ramifications of the global financial crisis. The US has its unemployment and the fiscal cliff to worry about. In Europe stronger European economies are being dragged by the ailing peripheral economies (Greece, Portugal and Spain). The two fastest growing economies (India and China) are facing major challenges in keeping their economies growing at the time when their major clients economies are not. In the MENA region, the Arab Spring started and 2011 & 2012 have been amongst the most difficult years for the Arab capital markets. (Markets were affected in varying degrees) 4

5 Large scale withdrawal of investors (institutional and retail) from the markets. Trading volumes, valuations and number of transaction have been on the decline

6 MENA Capital Markets Indicators * 2012 number up to end of November ** Source: Arab Monetary Fund Database 6 USD Billions 1,200 1,000

7 MENA Capital Markets Indicators * 2012 number up to end of November ** Source: Arab Monetary Fund Database 7 USD Millions

8 Brokerage Challenges Almost all brokerage companies within the region have suffered form the recent developments in the markets. All brokers witnessed marked declines to their volumes of trading, income, money under management and above all client confidence and trust. Though, some companies were affected more than others. Challenges could be grouped under the following headings: 8

9 Brokerage Challenges Low volumes of Trading Strong competition Pressure on fees Potential for violating market rules by offering rebates Fragmentation of the market Too many players Lack of incentives/willingness to consolidate Reasonably high infrastructure/ fixed cost Minim human resources Minimum technology infrastructure 9

10 Brokerage Challenges Increasing Regulatory Challenges Minimum capital requirements New rules and requirements Increased burden on surveillance and control Tighter risk management rules Imperfect Market Structure High percentage of retail clients Low level of participation of intuitional clients Weak role of local investment funds industry The virtually inexistence of long-term private saving and retirement plans/funds 10

11 The Way Forward Given all the challenges said, Brokerage Companies have to decide on their course of action. It seems that brokerage companies have to choose one of two options: stick to their business or leave They need to tackle a number of fundamental issues: 11

12 The Way Forward Where is my customer base? Customer segmentation Focus on core groups Look for untapped segments Proper targeting and offer access to new investment opportunities Improving back office and trading platforms Offer research or access to research Adopt a proactive strategy Make use of cross selling (in case of strategic partnerships) 12

13 The Way Forward Regional and Global Exposure: Develop networking relationships and partnerships with regional and global brokers Offer professional market inelegance and market access Proper positioning of your capital market in the relevant segment (frontier markets) Continuous access to company managements within you market Continuous follow up and update for clients with local developments 13 Source: Regional markets Challenges & Opportunities, Forum Finance, Bain & Company

14 Should we be Optimistic? The answer is: yes 14

15 Should we be Optimistic? The answer is: yes 15

16 Should we be Optimistic? The answer is: yes 16 Source: KIPCO, company presentation.

17 Thank You 17


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