By Keith Fitz-Gerald
Investment Director, Money Morning
In the race to buy global assets, Dubai seems unstoppable. After all, in the past few months they've spent billions on all sorts of global industries.
- In May, DIFC Investments, a subsidiary of Dubai International Financial Centre, invested $2 billion in Deutsche Bank AG (FRA:DBK), Germany's largest public bank.
- Dubai World announced in August it plans to invest over $5 billion in MGM Mirage (NYSE: MGM).
- And just last month, Dubai International Capital announced they had made a "substantial investment" in Sony Corp. (NYSE: SNE) as reported by Reuters.
My sources tell me they're prepared to pony up as much as another $100 billion in the next 24 months for more top tier companies.
It's a situation that's driving their Persian Gulf neighbor Qatar nuts, and with good reason.
Like Dubai, Qatar wants to be the Arabian financial center when the oil stops flowing. Qatar has also been investing in foreign ventures with a $1.5 billion investment in British-based supermarket group J. Sainsbury Plc (LON: SBRY) in June. The problem is that they're about 10 years behind the 8-ball when it comes to keeping up with Dubai.
That could change, however, should Qatar be able to acquire a controlling stake in a major European bourse, and it would be even better in Qatar's eyes should they be able to slow down Dubai at the same time.
And Qatar may get its chance soon. Already, rumors are flying that Qatar may mount a takeover bid following Borse Dubai's deal to purchase NASDAQ's 28% ownership in the London Stock Exchange.
The Qatari Investment Authority has naturally denied the rumors, citing long-term ownership interests. But it has not gone unnoticed by some, including us here at Money Morning, that, between the Dubai and Qatar, some 52% of the venerable London Exchange now rests in Middle Eastern hands.
Should Qatar press ahead - and that's a highly likely scenario given what's at stake- they would do so on the grounds that future ownership in the London Stock Exchange would substantially improve the business development prospects in Doha, which it sees as the next great Middle Eastern financial center.
And that's likely the real "deal" here.
In addition to immediately putting a damper on Dubai's investment plans, such an unlikely partnership would provide new financial linkages into the cash rich Middle East, at a time when western companies, many of which trade on the NASDAQ, desperately need the cash.
In fact, NASDAQ CEO Bob Greifield said as much recently, in a read between the lines statement. "These strategic actions will provide us with a footprint unlike any other exchange...with operations in key markets around the world."
With regard to how investors might play this, it may be as simple as buying NASDAQ (NASDAQ: NDAQ) or the London Stock Exchange (LON:LSE or PINK:LDNXF) with the intention of holding one or both for the next five years or so as these revenue streams and relationships build.
Of course, the risks here are pretty clear. The Middle East, despite being immensely wealthy and sitting on a gigantic pile of oil-induced cash, is hardly a paradigm of virtue or stability.
But then again, in today's volatile markets, few things are.
News and Related Story Links:
- Money Morning News:
Dubai Ports World's Record IPO - Money Morning News:
Sovereign Wealth Funds Biting into the World's Biggest Companies...Transparency and Motives in Question - Reuters:
Dubai looking to crash NASDAQ OMX deal - Reuters:
Gulf Arab foreign acquisitions since May
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.