Emirates NBD advises clients to ‘remain defensively invested’

Gary Dugan, Emirates NBD’s chief investment officer, said that 2016 looked like it would be a very tough year for investors.

The Bank of Japan's surprise policy announcement last week saw it adopting negative interest rates. Toru Yamanaka / AFP

Emirates NBD, Dubai’s biggest bank, said the fallout in financial markets may not be over yet as a strengthening US dollar, rising levels of debt and a slowdown in global economic growth continues to weigh on asset prices.

As a result, the bank’s chief investment officer said he was advising clients to be defensive in their investments, and to favour technology and healthcare stocks, as well as gold.

Gary Dugan, Emirates NBD's chief investment officer, yesterday said that 2016 looked like it would be a very tough year for investors.

He said: “Policymakers are still actively involved in supporting economies six years after the asset markets started their recovery, yet global growth continues to disappoint. Our advice is to remain defensively invested and wait for true value to appear before committing to any further significant purchases.”

Volatility in global financial markets has been high in recent quarters ahead the US Federal Reserve’s interest rate increase in December. The sell-off, however, accelerated last month as a litany of woes from crashing oil prices, concern about a further slowdown in China, prospects for more rate rises from the US federal reserve this year as well as rising yields in the junk bond market, assailed markets.

The MSCI All Country World Index, a benchmark of global equities, fell 10 per cent in the third quarter of last year ahead of the Fed’s first rate rise in more than nine years before rebounding 4.6 per cent in the fourth quarter.

But in January alone that global gauge of equities plummeted 7.5 per cent.

At the same time, economists, including those at the IMF, have been downgrading economic growth forecasts for this year while the overall direction central banks around the world may take to try to boost growth is still uncertain. While the central bank of Japan recently cut rates to below zero, the European Central Bank and the US Federal Reserve have not revealed their cards in full, only suggesting that the option for more accommodative monetary policy is still on the table.

“In a world that lacks global growth we still worry about the performance of global equities,” Mr Dugan said. “We advise investors to invest by sector and stock specifics, rather than by country. Our preference is for the technology and healthcare sectors.”

However, Mr Dugan singled out Japan, Europe and India as the bank’s preferred regions for investment.

Follow The National's Business section on Twitter