PROMINENT GCC INVESTMENT BANK CURTAILING

UNCLAS SECTION 01 OF 02 KUWAIT 000374 SIPDIS SIPDIS DEPARTMENT NEA/ARPI AND ALEXEI MONSARRAT E.O. 12958: N/A TAGS: EFIN EAID ECON WE GZ KU XF SUBJECT: PROMINENT GCC INVESTMENT BANK CURTAILING INVESTMENTS IN PALESTINIAN TERRITORIES FOLLOWING HAMAS VICTORY REF: A. 05 KUWAIT 5285 ¶B. 05 KUWAIT 2197 ¶1. (SBU) During a February 1 meeting, representatives from Global Investment House (GIH),one of the GCC's largest and most successful investment banks, informed Econoff that new GIH investments in the Palestinian territories were on-hold pending a reevaluation of the company's investments in the territories in the aftermath of the Hamas victory and the international political and economic response likely to impact investor confidence there. End Summary ¶2. (SBU) On February 1, Econoff met with Joseph Joseph and Sharad Jain, both Assistant VPs for Strategic Investment at Global Investment House (GIH),one of the GCC's largest and most profitable investment banks (over $2.5B market capitalization),for details on GIH's investments in the Palestinian territories. Econoff inquired about the nature and driving force behind GIH's investments in the Palestinian territories. Jain explained that GIH began investing in the territories in 2003 as part of the company's expansion strategy for emerging markets. ¶3. (SBU) According to Joseph, GIH investments in the territories focus primarily on real estate, telecommunications and the financial sector. Jain praised the "remarkable performance and good transparency and stability" of the Palestinian stock market (300% growth in 2005) as key to securing sizable GCC investor interest. He added that the territories presented "significant opportunities and very good returns" and that GIH had developed plans for an investment mechanism, in consultation with International Financial Corporation (IFC),to significantly increase GCC investments in the territories. Joseph noted that increased international investments (Turkey, Russia) and positive returns were contributing to heightened GCC investor interest. ¶4. (SBU) However, Joseph pointed out that GIH was re-evaluating its investment posture following the recent Hamas victory. He explained that existing GIH investments in real estate (Palestine Real Estate Investment Company--PRECO),telecommunications (Paltel) and financial services (Palestine Development Company--PADECO) would remain in place for the near term but that future projects, including the investment mechanism, were "on hold" for the foreseeable future. Jain, concerned about the suspension of foreign economic assistance, noted that it was unclear what impact the Hamas victory would have on overall investor confidence, including U.S. investors. ¶5. (SBU) Econoff, underscoring the USG concerns for the humanitarian well-being of the Palestinian people, explained that the international community was clear with regard to its expectations of the new Palestinian Authority government and that the burden was now on Hamas to accept political realities and enact necessary reforms. Joseph expressed cautious optimism that politically pragmatic elements in Hamas would prevail in moderating the party's platform in order to prevent an irreversible economic crisis. He welcomed continued dialogue with the Embassy on these developments and the opportunity to better gauge U.S. investor reactions to the political developments as part of GIH's own reevaluation process. Background: Global Investment House -------------- ¶6. (U) GIH was formed in 1998 and has quickly become a regional powerhouse staffed by 220 professional staff members (majority hold post-graduate MBAs) offering a full range of investment banking services to over 4000 clients representing a wide variety of private firms and individuals, primarily from the GCC. GIH was listed on the Kuwait Stock Exchange in 2003 and has since been added to the Dubai Foreign Exchange and the Berlin Stock Exchange. The company has a market capitalization of over $2.5B, manages assets valued at over $6B and posted $130M in profits in 2005. GIH is considered to be one of the largest investment banks in the region with operations and investments in all GCC countries and elsewhere in the Middle East and North Africa, including Jordan, Sudan, Egypt, Yemen, Syria, Tunisia, and Morocco. Additional information, including investment reports, is available on the company's website: www.globalinv.net. See reftels for previous reporting on GIH and its efforts in support of BMENA and MEPI. KUWAIT 00000374 002 OF 002 ******************************************** Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ******************************************** LeBaron