Gulf investors avoid stocks in favour of property

Gulf investors shun stock markets to invest aggressively in the property sector, leaving fund managers seeking to target other expatriates from the West and India.

Gulf nationals are shunning investments in world stock markets and seeking aggressive buys in local property, according to a new study from Invesco.

Location, location, location:

Industry Insights What's hot and what's not in the world of property. Learn More

A poll of 108 investment managers found that stocks account for more than half of the portfolios of Western and Indian expatriates, compared with less than a third of investors from the Arab world and only one fifth of Gulf nationals' investments, according to the Invesco Middle East Asset Management Study.

But the diversity of expatriates' investment preferences presented significant opportunities for local fund managers to tailor investments to expatriates from different parts of the world, said Nick Tolchard, head of Invesco Middle East. "Our findings have highlighted a strong appetite for international investing across expatriate segments in the GCC," he said.

"In order to effectively target diverse expatriate segments it is critical to recognise their individual requirements and investment preferences and to understand the emphasis they place on investing in their home markets."

Fund managers and private banks have aggressively targeted the Middle East as the soaring price of oil increases local wealth.

But equity managers continued to find slim pickings among wealthy nationals from Gulf states, the study found. Gulf nationals were most likely to invest in property, which accounted for 87 per cent of total portfolio values, the study found.

Gulf nationals were also more likely to be short-term investors, with investment horizons of two years compared with six to seven years for Western investors. Investors from the Gulf and India sought the highest target returns of 11 per cent, compared to lower target returns of 7 per cent for Western expatriates.

The financial crisis has taken an axe to local stock markets, with the Dubai Financial Market General Index losing 70.6 per cent of its value since the collapse of Lehman Brothers in September 2008.

By contrast, global markets have mostly recovered from the world financial meltdown, with the MSCI World Index of global equities only 1.5 per cent lower since that time, though recent market panics induced by the eurozone debt crisis have eaten into gains seen earlier in the year.