GCC countries, one of the world's biggest markets, have an estimated $1.5 trillion in private wealth, according to International Monetary Fund (IMF). In another study, global management consultants McKinsey forecast that by 2012, the total assets held abroad by the six Gulf states could reach almost $7 trillion. According to a new report by the Washington-based Institute for International Finance (IIF), the net foreign assets of the GCC countries are expected to rise by $200 billion this year to $2 trillion. Significantly, while a large portion of these massive funds will be poured into the international financial system and direct investments in the US, Europe and Asia, the Arab region is expected to take proportionally more than ever before. Egypt, Jordan, Syria, Lebanon, Morocco and Tunisia are expected to be the main beneficiaries, along with sectors such as banking, telecoms, real estate, tourism, construction and infrastructure. Based on an average price of oil at $50 a barrel, McKinsey calculates that the GCC states could be investing some $1.5 trillion abroad over the four-year period to 2012, or about $1 billion a day. By 2020, McKinsey said this could soar to $3.5 trillion, taking the region's total overseas wealth to $8.3 trillion. If oil were to average $70 a barrel, the outflows would rise to an average of about $628 billion a year, “implying new petro-dollar investments of nearly $2 billion a day”, the study predicts. Even if oil prices declined to $30 a barrel, the GCC's foreign assets would reach some $4.8 trillion by 2012. In a worst case scenario, they said even if the GCC states never invested another dollar abroad, the returns on their existing foreign assets would produce $1.6 trillion by 2022, making the GCC, along with China, one of the world's largest sources of surplus capital. “The GCC remains one of the world's biggest markets primarily because of the region's huge private wealth reserves,” said Eng. Mohammad Al Ballaa, NTG chairman in the conclusion of the Middle East Money Summit at the Jumeirah Beach Hotel in Dubai on Friday. Moreover, the GCC countries, riding the crest of unprecedented economic prosperity underpinned by soaring oil revenues, have surpassed even China's mammoth $1,100 billion of foreign reserves to register a record $1,600 billion in foreign assets, IFF said. According to financial experts, given the huge inflow of cash due to higher crude prices in the global markets, the current account surplus of the six Gulf countries will soon touch the $3 trillion mark. “The most formidable challenge facing the GCC states is dynamic management of their reserves, which are likely to soar to an astronomical $3 trillion, larger than all of Asia, by the end of the decade. However, handling the massive wealth in a prudent way poses a big challenge,” said Mohsen Fahmi, from the US-based Moore Capital Management, while addressing a conference on ‘Enriching the Middle East's Economic Future' in Doha recently. The UAE, Saudi Arabia and Kuwait account for the bulk of the GCC's $1,550 billion of foreign asset holdings, according to the IIF. The overall holdings represented 225 percent of the GCC's gross domestic product while China's foreign reserves represented 42 percent of GDP. More generally, the IIF said that private capital flows to emerging markets were on track to match last year's record of more than $550 billion, a sign of a generally positive economic environment. Meanwhile, the combined market capitalization of the largest 10 listed companies in the GCC amounts to $255 billion, Dr. Gil Feiler, an expert on the Arab financial markets, said in a new research paper. Saudi Arabia boasts 5 companies in the top 10 list, including the top three. Kuwait has 3 companies and the UAE and Qatar have 1 company each. Saudi Arabia's SABIC is the largest company with a market capitalization of $70 billion after falling 47 percent YTD. Closing this list is the Kingdom Holdings with a market capitalization of $10.2 billion. This company lost 52 percent YTD. The other companies in the list are STC (KSA), STC (KSA), Al-Rajhi (KSA), Etisalat (UAE), Samba (KSA), Qatar Industries (Qatar), Zain (Kuwait), KFH (Kuwait), and NBK (Kuwait). __
