Asia overtakes West as GCC wealthy’s preferred investment haven

HNWIs more concerned about preserving wealth than growing it, Emirates Investment Bank study shows

<p>Khaled Sifri, chief executive of the Emirates investment bank, says wealthy GCC investors&#39; focus is changing. Duncan Chard / The National.</p>

Global investors from the GCC are more interested in investing in emerging markets such as China and India in 2018 than Europe and the US, as the cost of assets in the developed world rises, according to a survey by Emirates Investment Bank (EIB), a UAE-based private lender.

"On the one hand, asset prices in established markets have gone up quite a bit in the past year, while on the other, emerging markets are displaying a strong chance of performing well at this stage of the economic cycle [as the global economy recovers]," EIB chief executive Khaled Sifri told The National on Tuesday.

The proportion of regional high net worth individuals (HNWIs) – those with investable assets of $2 million or more – looking to invest in Europe in the year ahead dropped to 34 per cent from 50 per cent in 2017, EIB’s 2018 GCC Wealth Insight report said.

Meanwhile, the proportion of respondents who said they wanted to invest in North America dropped to 17 per cent from 46 per cent, according to the survey of 108 GCC-based HNWIs conducted in the final weeks of last year.

By contrast, the proportion of investors looking to invest in Asia this year rose to 47 per cent from 39 per cent last year, while 38 per cent said they wanted to invest in the wider Middle East – excluding the GCC – up from 29 per cent in 2017. Overall, Asia was the preferred investment destination for 2018 and over the next three to five years.

However, respondents who described themselves as “global investors” as opposed to “GCC investors”, dropped to 72 per cent from 79 per cent in 2017, according to the survey. This suggests an uptick in preference for keeping assets closer to home and investing in GCC assets, EIB said.

“Confidence in the GCC’s economic stability, together with the recognition of external risks, has prompted local HNWIs to mitigate risk and increase their exposure to regional markets,” the report said. It highlighted the UAE as a particularly attractive investment destination, with its tax-efficient business environment and diversified economy.

After a subdued past two years, GCC economic growth is forecast to pick up in 2018 on the back of rising oil prices and higher spending by regional governments. GDP growth across the GCC is expected to rise to 2 per cent on average this year, from 0.7 per cent in 2017, according to the World Bank. Global GDP growth is forecast at around 3.5 per cent.

“The global economy’s strong performance has given HNWIs in the GCC a greater sense of optimism, both in the global and the GCC economy,” Mr Sifri said.

More than three-quarters of respondents to EIB’s survey said the global and regional economy will either improve or stay the same over the next five years.

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Still, survey respondents said regional geopolitics are having a bigger impact on their investment decisions than in previous years. Overall, 55 per cent said geopolitical issues have changed their approach to investing – a rise of 10 per cent from 2017.

The exact proportions varied by country, but Kuwait and Saudi Arabia-based investors were the only ones who said regional geopolitics had not changed their approach to investing. In Bahrain it was evenly split.

The study also shows differences in investors’ outlook on their own country. In Kuwait, not a single respondent said their country’s economic prospects would improve in 2018, compared to 57 per cent in the UAE.

Similarly, in Saudi Arabia, 52 per cent of HNWIs said conditions would worsen this year, compared to 29 per cent who thought they would improve. Mr Sifri noted the survey was conducted when the Saudi government was executing an anti-corruption crackdown last December. Acceleration of the kingdom’s Vision 2030 economic diversification strategy is likely to yield a more buoyant outlook in 2019, he added.

In general, GCC-based HNWIs continue to be conservative in their approach. The proportion of investors who said they were primarily concerned about growing their wealth has dropped to 62 per cent this year from 80 per cent in 2017 – bringing wealth accumulation to a five-year low, EIB said.

An increased proportion (38 per cent) are focused on preserving their wealth, due to “economic and political instability” for 39 per cent, and “uncertainty and fear about the present environment” for 27 per cent of respondents.