Billions at stake as Arab investors in US absorb Trump victory

Attention will focus on reaction from major Arab Muslim investors in the US – but that may not become clear in the immediate aftermath of Donald Trump's victory.

Donald Trump proved victorious over Hillary Clinton to take over the next US presidency. Brian Snyder and Jonathan Ernst/ Reuters

Billions of dollars of Arab investment in the United States is at stake after Donald Trump won the presidential race.

In December, early in his White House campaign, the property tycoon turned presidential hopeful drew widespread criticism from across the region after threatening to impose a ban on Muslims entering the country.

Now attention will focus on reaction from major Arab Muslim investors in the US – but that may not become clear in the immediate aftermath of his vic­tory over Democrat rival Hillary Clinton.

“Investors from the region won’t liquidate, as much will depend on actual policy change that goes beyond the mere rhetoric,” said John Sfakianakis, the director of economic research at the Gulf Research Centre in Riyadh.

“Yet if the rhetoric becomes policy, then investors will have to look for safe havens and that will not be as easy as one thinks.”

As the world digested the news that many commentators have compared to Britain’s surprise vote to leave the European Union or the momentous Brexit, global markets tumbled while gold surged as investors looked for safe havens.

Now investors will be looking beyond the immediate global market upheaval towards longer-term implications for trade relations between the United States and regional economies, the effect on interest rates and the movement of the dollar to which the UAE dirham is pegged.

Khalaf Al Habtoor, the chairman of the Dubai-based Al Habtoor Group, predicted the mass liquidation of Arab Muslim investments in the US following a Trump win, in an interview with The National before the election.

The billionaire friend of the former US president Jimmy Carter said the property tycoon did not have the “mentality” to be president and predicted that jobs would be lost across the world’s largest economy.

He said the reaction from the Arab-Muslim diaspora to a Trump presidency would be dramatic. “I think a lot of countries or investors with business there [in the US] would liquidate. There would be a lot of jobs lost.”

Mr Trump provoked a global storm of controversy when he called for “a total and complete shutdown” of Muslims entering the US in December, following a number of terror attacks.

His comments drew swift condemnation from across the poli­tical divide in the US and provoked an angry reaction from the region.

Damac, the property developer, removed a massive billboard featuring Donald Trump at the Akoya site in Dubai just days after he made his remarks.

The huge signage had been advertising the Dubai-based developer’s Akoya development and the Trump International Golf Course.

The Landmark Group, a regional retail and hospitality group, also suspended sales of all Trump-branded items for its Lifestyle outlets following his comments.

Total Emirati foreign direct investment into the US was more than $27 billion last year and has nearly doubled in the past five years, according to data from the US-UAE Business Council.

Trade between the US and Saudi Arabia is worth more than $62bn a year, according to the Saudi Arabian General Investment Authority.

During his victory speech early on Wednesday morning, Mr Trump said: “We have a great economic plan. We will double our growth and have the strongest economy anywhere in the world.”

Still, the election result triggered upheaval on global financial markets as futures on the S&P500 fell by 5 per cent as the Nikkei 225 dropped by a similar measure. Currency markets were also thrown into turmoil as the dollar fell by about 3 per cent against the yen. It recovered later against a basket of currencies.

One near-term focus will be on US interest rates ahead of the Fed’s December meeting as the odds for a rate hike fell.

“The Fed may choose to delay the widely expected rate increase in December, depending on the severity of the market reaction over the next few weeks,” said EFG-Hermes in a note. “However, we still see the Fed raising rates in 2017, and expect that US fiscal policy will be more important as a driver of markets next year.”

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