January 14, 2021

Why we could be entering a 'golden age' for private investors in emerging markets

Dubai-based NBK Capital Partners delivers positive forecast for private capital investments in the Middle East

Private capital investments in the Middle East are likely to go beyond the regional or local and attract developed market investors who have long overlooked the area, said Moustafa.

The next two years are “the golden age” for private investors who want to invest in emerging markets, according to a senior director at Dubai-based NBK Capital Partners.

Yaser Moustafa, senior managing director at the venture capital and private equity firm, said that Middle East-based companies who’ve thrived in the recent tough environment dominated by the coronavirus pandemic are well-positioned to attract private capital investments.

“I think the investments you can make in 2021 and 2022, by virtue of the low valuation you can get now and the growth prospects for the region coming out of a low, is compelling,” said Moustafa.

“For companies who have survived, who have performed well and who have a history of operating well, capital will come. We have personally seen the capital come from smart investors who see the opportunities,” he added.

Given this context, private capital investments in the Middle East are likely to go beyond the regional or local and attract developed market investors who have long overlooked the area, said Moustafa.

“I think, more and more, developed market investors are going to shift to the emerging markets. Today they may have zero funds allocated to the Middle East and so this does not mean they are going to turn around and say they want 25 percent for the region, but it definitely should not be zero,” said Moustafa.

“They want to go to emerging markets where valuations are better, growth prospects are better and where they handled coronavirus better meaning their recovery, theoretically, will be sooner. They will move to the private markets where the real value is and look for a credible player to work with,” he continued.

Moustafa said he hopes NBK Capital will be that player explaining that they have already managed to raise money from investors in the UK and US, as well as regional investors.

Given that the population in the Middle East is largely a young one, investments in education, retail and F&B will continue to play a role going forward, said Moustafa. However, he outlined three new key areas of investment for 2021.

“The areas which I think are compelling are digital and technology. This is part of the acceleration to e-commerce, online activity and even fin-tech. I think that is the number one area you want to play with in the region and it includes some non-obvious businesses such as data centres,” said Moustafa.

“The second area is warehouses and logistics. Part of this is fulfilment for e-commerce but the second part is the increasing desire, post-Covid and post borders being closed back in March, to onshore production activity and more of the supply chain so companies have more control over when things get to them,” he added.

“My contrarian view is that you should be looking at food and beverage. F&B valuations have never been lower in the region so the contrarian person comes in and buys all those assets at a low price, puts them all together and waits for the economic recovery over the next two to five years. For brave, smart investors who know their way around the sector, I think it is a great time to acquire F&B assets,” said Moustafa.

Moustafa is optimistic about the opportunities that lie ahead for 2021 but cautions that it won’t always be the case.

“The good news is that 2021 for the region, for the private capital space and NBK Capital is going to be a great year to invest. We are seeing growth, interesting valuations, and opportunities to expand across borders,” said Moustafa.

“We are optimistic about these markets and believe there is an opportunity there. There won’t be always an opportunity, because then a bunch of money comes in and it gets too competitive as valuations go up, but we are a few years away from that,” he added

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