x Abu Dhabi, UAEThursday 18 January 2018

Investors look at UAE for long haul

Investors are ploughing capital into the Emirates for the long-run as political instability strains the Middle East, and the UAE appears a more attractive investment for those who may not exit the country for many years.

The UAE is the most successful Arabian Gulf country to attract capital from both Mena and developing markets. Above, the Dubai Financial Market. Pawan Singh / The National
The UAE is the most successful Arabian Gulf country to attract capital from both Mena and developing markets. Above, the Dubai Financial Market. Pawan Singh / The National

Investors are ploughing capital into the Emirates for the long run as political instability strains the Middle East, and the UAE appears a more attractive investment for those who may not exit the country for many years.

A study from Invesco Middle East has found that most expected the UAE's markets to benefit from substantial inflows of overseas capital.

It was based on 125 interviews with sovereign wealth funds, banks, family offices and independent financial advisers around the Arabian Gulf at the start of this year. What was clear was that expatriates were looking towards the UAE as a place to put down roots, attracting greater amounts of capital than elsewhere in the region, said Nick Tolchard, the head of Invesco Middle East.

"The UAE is the most successful GCC country to attract capital from both Mena, but also developing markets," he said. "The only other market that shows positive growth is Saudi Arabia. In other countries… private capital in net terms is leaving the country."

Political stability in the UAE was cited as a reason for investing by one third of the respondents to Invesco's survey. India was the biggest source of private capital entering the UAE in the region, accounting for 15 per cent of private capital, followed by Syria with 13 per cent and Russia with 10 per cent.

The inflows from emerging markets such as India, Russia and China accounted for 43 per cent of inflows and significantly outstripped those from developed markets such as Europe and the US, which accounted for 13 per cent.

Investors are also becoming less concerned about making a quick buck.The average time span of an investment has risen from 5.5 years in 2011 to 6.4 years in 2013, a factor attributable to fewer expatriates looking to the Gulf as an excuse for a short-term stint overseas.

"If you have moved somewhere and intend to stay for longer, your time horizon increases," Mr Tolchard said.

Among Arab expatriates, 41 per cent said they intended to stay for more than five years. A further 14 per cent said they planned to stay in the UAE for more than 20 years.

Since December 2011, since the Tunisian uprising began and sparked the Arab Spring that overthrew authoritarian governments across the region, bank deposits within the UAE financial system have increased by 15.7 per cent to Dh1.23 trillion, according to data from the Central Bank. Property prices also bottomed that year and have since made a substantial recovery.

Non-resident Indian investors were also lengthening their investments as they move towards life and pension products, Mr Tolchard added.

"This is a very good sign for life and pension firms that are setting up and established here," he said. "The longer people have a time horizon, they're more likely to take risk and increase exposure to higher risk assets."

At the same time, Invesco has noted an increased focus on the part of regional governments to support state pension schemes.

That is coming alongside private sector initiatives in the UAE, where the National Bank of Abu Dhabi has established corporate pension plans for expatriates similar to US 401(k) schemes.

Institutional investors such as Standard Life, the UK's biggest corporate pension provider, are also seeking a bigger market for their pension products.

 

ghunter@thenational.ae