01 December 2015

Mideast luxury market grows 13 pc

THE global personal luxury goods market – including leather accessories, fashion, hard luxury and fragrance and cosmetics – is expected to reach $272.4 million in 2015, said a report by Bain & Company.

This represents 13 per cent growth at current exchange rates.

The overall global luxury industry will surpass $1.07 trillion in retail sales value in 2015, says the report. The luxury industry as tracked by the company comprises 10 segments, led by luxury cars, luxury hospitality and personal luxury goods accounting for 80 per cent of the total market.

Global currency fluctuations and continued jet-setting of “borderless consumers,” aided the personal luxury goods market growth, says the 4th edition of Bain’s “Luxury Goods Worldwide Market Monitor,” released recently in Milan in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers industry foundation.

Category wise, jewellery has continued to outperform the other personal luxury goods in the Middle East, it says.

“Going forward, we expect the Middle East market to show new signs of life driven by mall openings, but the region’s growth will occur at a much slower level versus the last five years. A sustainable high single digit growth rate will become a new normal for the market with important implications of the required capabilities for success,” says Cyrille Fabre, partner and head of Bain’s retail and consumer products practices in the Middle East.

Wholesale is still the dominant selling channel within the personal luxury goods market, capturing 66 per cent of market share. However, retail continues to gain share, despite a slowdown in network expansion.
Simultaneously, e-commerce grew to 7 per cent market share in 2015, nearly doubling its penetration since 2012.



Mideast oilfield services to top $13bn

HIGHER exploration and production (E&P) expenditure, financial durability of the companies and customers are likely to drive oilfields services market in the Middle East to record revenues worth $13.4 billion by 2019, a report said.

Meanwhile, the surge in active rigs in the Middle East, backed by shift in focus towards onshore drilling will fuel the regional drilling to record revenues worth $88.2 billion by 2019, added the latest publication entitled “Middle East Oilfields and Drilling Services Market Outlook to 2019 – Future Growth led by Deepwater Drilling and Quest for Increased Production” from Ken Research, a leading global industry research and information service company.

Middle East OFS industry valued to around $9.7 billion in the year 2014, driven by the increased enhanced oil recovery (EOR) and increased number of mature fields. The presence of huge reserves in the region out of which many are yet to be explored and exploited presents an extensive market to the OFS companies in Middle East as compared to any other geographical locations across the globe, the report said.

The demand for drilling services is budding up with growing drilling activities in onshore as well as in offshore oil fields. Some of the drilling services like directional drilling, land drilling, offshore drilling, well service and work over are becoming essence, with the amplified development of oil & gas exploration and production activities, according to the report.

The cost of operating drilling rigs is an important factor to bear in mind when considering which oil regions are suffering the most in the current low oil price environment. The drilling services market in Middle East is likely to face marginal slowdown in terms of revenue growth, owing to subdued crude oil prices. However, in the long run the prices of crude oil will become stable along with the prospects of surge in drilling demand, said Ken Research in the report.



Big growth in global Islamic finance assets

GLOBAL Islamic finance assets had an estimated value of $1.8 trillion in 2014 and are expected to almost double by 2020 to reach $3.2 trillion, according to the ICD Thomson Reuters Islamic Finance Development Indicator.

As global acceptance of Islamic finance continues to grow, more non-Muslim sovereigns are starting Islamic finance initiatives by first introducing Islamic finance regulations and assisting Islamic financial institutions to establish their operations, and then tapping the Islamic capital markets through sovereign sukuk.

Canada, which is considered to have the most effective and safest banking system in the world, is one country that is looking to position itself as a regional hub for Islamic finance in North America. Its advantage is joined with an outward looking orientation that is more favourable to Islamic finance than in the United States, both in terms of regulatory aspects like the ability of UCITS to reach both the Canadian and global market and even seemingly small things like official counts to accurately measure Canada’s Muslim population.

Oil-rich Kazakhstan is adopting Islamic finance in efforts to diversify the country’s dependence on oil income amidst the sharp fall in crude prices. It plans to position Astana to become an international financial centre of the new Silk Road and a regional hub of Islamic finance.

Kazakhstan in 2009 became the first country in the CIS and Central Asia to introduce legislation for Islamic banking and to create the legal basis for the development of the industry. Still, the country’s Islamic finance industry is in its nascent stage.



Cross-border Mena M&A activity up 40pc

COMBINED outbound and inbound deal activity in Mena showed an increase of 40 per cent from 45 deals in Q3 2014 to 63 in Q3 2015, according to EY’s Q3 Mena M&A Update. Domestic announced deal activity on the other hand decreased from 59 deals in Q3 2014 to only 28 deals Q3 2015.

Phil Gandier, Mena Transaction Advisory Services leader, EY, says: “EY’s latest bi-annual Mena Capital Confidence Barometer (CCB) infers quiet confidence in the regional and global economic outlook, despite the continued pressure on oil price through 2015. Optimism about economy prospects in Mena appears to have firmed since April 2015. The CCB survey finds that 18 per cent of Mena respondents believe that the regional economy is on a strong recovery path, up from the 6 per cent who believed so in April 2015. There is an underlying sense that executives believe that the hydrocarbon-dependent economies have been able to weather the storm. Governments appear to be committed to key projects, and most have sufficient reserves to run deficits for a few years yet.”

Announced deals  in the Mena region decreased by 13 per cent from 104 in Q3 2014 to 91  in Q2015. Deal value also declined from $8.5 billion in Q3 2014 to $5.4 billion in Q3 2015.

Anil Menon, Mena M&A and IPO leader, EY, says: “It is clear that the recent macro-economic uncertainties and the extended summer and other holidays in the region have had an effect on domestic deal activity in Q3 2015.

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