58% of UAE investors plan to increase their exposure to equities in the next 6 months

High cash holdings currently dominate portfolios worldwide, UBS Investor Sentiment survey finds

About 64 per cent of investors globally believe that stocks are an effective way to diversify portfolios during the post-Covid-19 economic recovery. Photo: Getty Images

About 58 per cent of investors in the UAE are planning to boost their exposure to stocks in the next six months, according to a new survey by global wealth manager UBS.

This compares with 41 per cent of investors globally who are considering increasing their exposure to equities, while 12 per cent intend to cut their stock holdings and 47 per cent plan to keep their portfolios the same.

The global Investor Sentiment survey polled 4,000 investors and business owners across 14 global markets, including the US, Europe, Asia and the UAE from March 30 to April 18, 2021.

However, investors continued to hold elevated levels of cash in their portfolios. Cash accounted for 22 per cent of individual investors’ portfolios globally.

Average cash holdings of investors in the UAE have increased by 9 percentage points since last September and are currently at 26 per cent, the UBS study said.

“Investors’ cash holdings are still far higher than our recommended allocations, especially given the current market and economic environment, so it is encouraging that they are looking to invest more in equities,” Tom Naratil, president of UBS Americas and co-president of UBS Global Wealth Management, said.

“If inflation picks up, the value of cash will be eroded in real terms, and investors will be forced to look to other asset classes to help meet their financial goals.”

This mirrors the findings of Bank of America's February Global Fund Manager Survey, which found that higher-than-expected inflation is the biggest risk for global financial markets.

Every month since February 2020, fund managers highlighted the pandemic as their number one concern. However, investors are now primarily concerned that the economic recovery could unleash a surge of price growth that could be hard to contain.

Nearly half of all global investors are "very concerned" and 26 per cent are "somewhat concerned" that cash will take a hit if inflation rises too much, according to the UBS survey. About 41 per cent said they would increase their holdings of stocks in such a scenario, while 31 per cent said they would increase their real estate positions, it added.

About 70 per cent of investors globally see technological transformation as the main theme over the next six months, with 64 per cent believing that stocks are an effective way to diversify portfolios during the post-Covid-19 economic recovery and 63 per cent saying that sustainable investing is a promising opportunity.

“In the UAE, a majority of investors told us they are seeing opportunities in industries that are being transformed by technology,” Ali Janoudi, head of Middle East and Africa at UBS Global Wealth Management, said. “We agree and believe that sectors such as GreenTech, FinTech and HealthTech will be structural winners in the long term.”

Investors and business owners globally see US President Joe Biden's administration as a tailwind for the global outlook over the next four years, according to UBS.

About 64 per cent see the Biden administration as having a positive impact on the global economy, 60 per cent feel it will support global markets, and 57 per cent say it will benefit their personal finances. Fifty-four per cent of business owners say it will boost their companies, the study found.