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Islamic Middle Eastern funds seek the Euro

8 April 2003     Warren Edwardes was interviewed by Shaheen Pasha, Dow Jones Newswires.

 "I  see anecdotal evidence of increasing political and sentimental weighting influencing the direction of Islamic and Middle Eastern investments. " said Warren Edwardes, ceo of London based financial product development and risk consultancy, Delphi Risk Management. "There has been an increased demand for euro denominated funds over the past year and a trend away from US dollar assets as evidenced by the rise in the Euro towards launch levels not justified on economic grounds. What is new is the drift in sentiment away from Sterling, which seems increasingly unlikely to join the Euro on political as well as economic grounds.
The reasons for the shift in sentiment away from the US Dollar are many:
The need to diversify away from a heavy concentration in a single market and currency;
Events in Iraq and a sceptical belief that the "road map" for Palestine will amount if anything at all to a scattering of villages resulting in a Middle Eastern Bophuthatswana;
Fear of seizure of Middle Eastern funds in the US and the UK on terrorism grounds perhaps because of a similar sounding Arabic name to suspicious funds. The Bush / Blair summit in Northern Ireland furthermore has highlighted a feeling of inequity and a complaint that terrorism in the UK to date has been substantially financed in New York, much of it openly, and there has been no seizure of donor funds there or arrests of donors;
The intention to genetically profile US residents of Middle East origin and the perceived lack of welcome mitigates against investment.
Finally, there are always followers of trends who if they perceive a shift in sentiment for whatever reason will follow and exaggerate the trend.

Real Estate investment seems to buck the trend to bypass Sterling and a number of Islamic Real Estate funds have recently been set up to invest in the UK.

It is always possible that there is more public talk than private action on disinvestment from the US Dollar. Middle Eastern investors are aware that their currencies are dollar linked and would be taking a currency play.



Warren Edwardes is CEO of Delphi Risk Management, the London-based financial product creativity, communication and control consultancy.

Warren was previously on the board of Charterhouse Bank and has worked in the treasury divisions of Barclays Bank, British Gas and Midland Bank. He first researched into what were later to be called "derivatives" in 1975 and was part of the team that executed one of the world's first currency swaps in 1981. Since then he has devised and transacted numerous structures that form part of the history of derivatives. Warren can be contacted via we@dc3.co.uk

Warren Edwardes <note  spelling of edwardes> is author of best seller "Key financial instruments: understanding and innovating in the world of derivatives" which includes an appendix on Islamic Banking.  see http://dc3.co.uk/kfi

Delphi Risk Management: Delphi creativity Delphi communication & Delphi control are the Innovation, Communication & Risk Management arms of Delphi Risk Management Limited 

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