Abu Dhabi eyes foreign buys in 2011: HSBC

The emirate of Abu Dhabi is on the prowl for international acquisitions and is eyeing deals in the energy and hospitality sectors in 2011, said a senior executive at HSBC Middle East.

Declan Hegarty, Managing Director and Head of HSBC's Abu Dhabi office, also said he expects regional bond issuance to hit $40 billion in 2011 in contrast to about $35bn last year.

"There are a number of entities in Abu Dhabi who are considering acquisitions that are consistent with 2030," Hegarty told the Reuters Middle East Investment summit, referring to the emirate's Plan 2030 strategic development blueprint.

"Almost certainly you'll see activity in 2011 and it will be outside this region and within it. There are a number of industries around the world where Abu Dhabi has exposure and there are a number of assets within those industries that are attractive."

Abu Dhabi is the largest and wealthiest emirate in the seven-member UAE federation and home to 90 per cent of its oil resources. The Abu Dhabi Investment Authority is one of the world's largest sovereign wealth funds.

"Any industrial process in energy, where you could find a competitive industry in Abu Dhabi or the UAE is fair game," Hegarty added. "I wouldn't rule out hospitality, telecoms clearly is in play at the moment."

HSBC, one of the oldest banks in the region, has expanded operations in the UAE capital, lured by its vast wealth and deal potential.

The bank has been a mandated arranger for most significant bond issues this year, including Dubai's first sovereign bond foray since its 2009 debt crisis.

Hegarty said bond issuance from the region will rise due to strong investor demand but the focus should shift to longer-term funding. Regional issuance totalled about $35bn in 2009.

"I reckon you'll end up there or thereabouts for this year. So 2011, assuming the year starts strongly, there's no reason why the market can't hit $40bn," Hegarty said. "I would be expecting a number of issuances out of Abu Dhabi over the next 12 months."

Abu Dhabi is becoming the breakout emirate for investment, said speakers at the summit.

"I'm finding attracting people to Abu Dhabi is easier than it was three years ago because people know where it is now, for starters. The infrastructure is improving," said Hegerty.

Abu Dhabi's appeal with regional and international investors crosses sectors, from oil and gas to the corporate banking and real estate markets, executives said.

Abu Dhabi, which suspended a number of projects in the past two years, has been more cautious in awarding project tenders as the real estate market took a tumble, said Arabtec's Chief Financial Officer Ziad Makhzoumi.

Abu Dhabi developers will continue to complete and hand over projects next year, mainly in the high-end market, said Gurjit Singh, Chief Operating Officer, of Sorouh Real Estate. But there's a dearth in mid-income housing -- a market developers can explore to attract expats and Emiratis.

Singh said there has been an influx of oil and gas companies, as well as infrastructure-related entities, that now have long-term contracts in Abu Dhabi of 15 to 25 years and are looking for reasons to reside in the emirate.

"In Abu Dhabi, we will start producing some of those new lifestyle destinations," Singh said. "I would say anything between two to three years, then you may see a major reversal in the flow."

Abu Dhabi is also expected to be an active hub for corporate banking. Financial institutions, like HSBC, are expanding their presence to meet the growing need in the market.

There is wide expectation that the emirate will issue a sovereign bond next year and HSBC's Hegerty said there should be an uptick in mergers and acquisitions both within the emirate and with Abu Dhabi-based entities looking globally for opportunity in 2011.

"You have a growing level of confidence in the Abu Dhabi range of companies as to how they can manage their growth and how Abu Dhabi can diversify its wealth and plan for its future," he said.

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