Will hedge funds stop selling on December 31st?
Posted on 18 November 2008 with no comments from readers
Hedge funds are driving global capital markets down and down with their relentless selling, so when will they stop?
This morning I listened to Citadel Capital CEO Ahmed Heikal’s presentation to the Private Equity World MENA 2008 organized in Dubai by Terrapin. He suggested hedge funds would look at their year-end redemptions after the November 15th deadline and carry on selling until they could fulfill redemptions.
Hedge fund sales
That makes good sense. Hedge funds have no choice but to sell down all their assets to repay their obligations to subscribers. If as Mr. Heikal suspects redemptions have been higher than expected then so will be the sell off.
But does that mean the selling will stop on December 31st? It could indeed mark a selling climax – the favored time for a stock market crash by Indian astrologers, although have we not already had one in October-November?
Slower meltdown
A gloomy delegate from Germany said he thought the bailout packages would string the slow meltdown of stock market values over the next couple of years, and the year-end climax would just be a part of that long process.
To be fair he has stock market history on his side. Crashes are dramatic but the bigger picture is a much longer up or down wave, and you do not need a degree in macroeconomics to see what type of wave we might now be experiencing.
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Press Release:Cairo, Egypt: November 19, 2008
Private Equity Leader Citadel Capital Urges Cautious Optimism for MENA Private EquityFirm’s founder tells PE World MENA conference that despite global economic pressure, there are opportunities to be found across the region
Ahmed Heikal, Chairman and Founder of leading Middle East and North Africa private equity firm Citadel Capital, delivered the opening keynote at Dubai’s PE World MENA conference on Tuesday.
The primary question, Heikal said, is how much growth will slow in 2009 compared to this year. Although they are forecasting that the MENA region will grow two to three times as fast as the global average next year, both the World Bank and the International Monetary Fund have recently downgraded their outlooks for global growth.
Against that background, Heikal urged regional private equity players to exercise caution in the coming 18 months. The still unfolding global financial crisis and economic slowdown have left credit markets frozen and dampened public market valuations. Difficult fundraising conditions will further constrain private equity activity.
“In the next two to three years the global economic head winds will slow the region’s private equity deal pace. There will be fewer deals, and they will be of a smaller size,” Heikal said. “Citadel Capital’s platform companies, which span 14 industries — from cement to retail, agriculture and food products to the complete oil and gas value chain — are well positioned to weather the coming storm. Our emphasis in the coming months will be to help them meet their business goals in this challenging climate.”
Heikal laid out a cautiously optimistic case for regional private equity, pointing to rising intra-regional investment, rising private-sector participation in GDP and investment and diversification away from oil.
“There was 18 billion dollars in intra-regional investment in 2006, more than 70% of it from the Gulf into non-oil countries such as Egypt,” Heikal said. “From here, we all know the story: Billions of dollars in FDI have flowed into the region, and governments and the private sector alike have worked hard to improve competitiveness.”
MENA equities markets have boomed, adding 550 billion dollars in new value — even after factoring in the market slump. At 315 million inhabitants, the Middle East and North Africa (MENA) have the third-largest population on the planet. With over 1.4 trillion dollars in aggregate GDP, the region is the world’s tenth-largest economic bloc, and continues to grow.
Citadel Capital, the leading private equity firm in the Middle East and North Africa, also participated in the PE World MENA conference’s private equity leaders’ roundtable: How are regional private equity funds influencing global investing?
—Ends— Citadel Capital is a Cairo-based private equity firm focused on acquisitions, turnarounds and greenfields in the Middle East and North Africa. Established in 2004, Citadel now controls investments worth more than US$ 8.3 billion in industries including mining, oil and gas, cement, transportation and food. For more information contact:Ghada HammoudaHead of Corporate Communicationsghammouda@citadelcapital.com Or May Ezz El DinMobile: 002-010-0707-121