Look out… here comes $1 trillion. Arab investors are planning on increasing their assets by over $1.7 trillion over the next four years. And an astonishing amount of that is going to end up on our doorstep.

Yesterday at Christie’s, an anonymous buyer paid a record £2.5 million for a single leaf from an ancient Koran manuscript – more than twenty times the auction house’s lower estimate for the lot. Just a few minutes later, a 10th-century carved marble capital from a royal palace of the Moorish rulers of Spain sold for £1.3 million pounds, setting a new record for an Islamic stone carving. Christie’s estimate for the piece had been £50,000 to £70,000. The sculpture was put up for sale by a church in Pennsylvania, where it had been hidden in a barn for more than a century.

“The number of international private buyers active at the top end of the market demonstrates the increasing strength in depth in the Islamic and Indian Art Worlds,” said William Robinson, Christie’s international head of Islamic art, after the auction. What he was saying is, essentially, what we have been saying here at Profit Hunter – there is a huge amount of money out there in the developing world, and that pot is growing very, very quickly indeed.

The Middle East’s fast-growing wealth isn’t all ending-up on conspicuous consumption though. A huge amount of it is being invested in the global financial system. According to a new report by consulting firm Oliver Wyman, rich Gulf Arabs will boost their collective assets 81 per cent from $2.1 trillion today to $3.8 trillion by 2012. And a huge part of that will end-up overseas. You see, the richest individuals in the six Gulf Cooperation Council states, including Saudi Arabia and the United Arab Emirates, keep 52 per cent of their money off-shore, compared to just 16 per cent for high net worth investors globally.

Over at Christie’s though, Mr. Robinson has also got a lot to smile about. The 282 lots on sale at Christie’s Islamic and Indian Art auction raised a total of £11.8 million pounds – more than double the upper pre-sale estimate.

Lose a few trillion…

Christies isn’t the only one that has been getting its estimates wrong – The International Monetary Fund (IMF) has now announced that total losses from the collapse of credit markets could top $1 trillion dollars (£500 billion). That’s bad news when you realise that we have only seen about $170 billion in losses from the credit crunch. The real fireworks may not even have started yet.

We may see share markets rally for brief periods, but the trend remains downward. To stress the point that I have been trying drive home here at Profit Hunter, I don’t believe that markets are anywhere near a bottom right now. We still have a long way to go – particularly here in the West, because the Western markets still haven’t fallen as far as the emerging markets have, despite the fact that this is where we are seeing the worst effects of the credit crunch.

African opportunities

There are plenty of investment opportunities elsewhere though. And I am very bullish on Africa. Economic growth on the Dark Continent has been driven by China’s entry into the region in search of natural resources to fuel its economy and new markets for its products. Now things are being turned-up a notch by Asia’s other emerging giant, India. They’re in the middle of the inaugural India-Africa Forum Summit in New Delhi right now which is meant to help India catch-up with China in the region.

And there is a lot of catching-up to do. India’s trade with Africa has soared from $967 million in 1991 to $20 billion in 2006/07. But China’s trade relations with Africa, which were worth less than India’s in 1999, have since leapt to $55 billion. India’s push into Africa is going to give the continent a shot in the arm. My prediction is that Africa is about to go from red hot to white hot. Sub-Saharan Africa economies grew by an average 6.1 per cent last year and are predicted to grow by 6.8 per cent this year.

And I don’t think that is going to slow down any time soon – Africa’s boom is going to continue for a long time to come…

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Sincerely

Manraaj Singh
Editor
Profit Hunter