Monday, May 20, 2013
Dubai: The UAE is attracting a huge chunk of foreign private capital entering into the GCC (Gulf Cooperation Council) region, thanks largely to the local investment opportunities in the country.
The latest annual Invesco Middle East Asset Management Study, which looks at the evolving asset management industry in the GCC, showed that the UAE is becoming an important hub for foreign capital, with nearly half (43 per cent) of funds entering into the country coming from emerging markets, particularly India, Russia and China. When combined, capital flows from these markets are bigger than those from developed countries. India tops the list at 15 per cent, followed by Russia (10 per cent) and China (7 per cent).
Invesco said the UAE’s political stability, aside from the local investment opportunities, is driving the capital flow.
Nick Tolchard, head of Invesco Middle East, noted that there has been a “structural shift” in fortunes and the UAE is showing signs of developing a leading position as a regional hub between Europe and Asia.
Before the global recession, leveraged capital, such as properties bought with mortgages, flowed into the UAE from developed markets. However,the picture painted by respondents surveyed by Invesco in 2013 suggested that non-leveraged capital, such as properties bought with cash, is now flowing in from regional and emerging markets.
“As an investment centre, the UAE has been proactive in attempting to build relationships and encourage investment from emerging markets so these inflows could also be indicative of UAE policy rather than simply emerging markets seizing the opportunity. This re-balancing has been important to the UAE recovery, as developed markets continue to focus on the economic situation closer to home,” the report stated.
Following the huge capital flows into the UAE, banks have reported a significant growth in deposits, while the property sector started to show recovery signs. “The inflow trend is supported by national statistics that highlight a 9 per cent net increase in UAE bank deposits during 2012, and a 17 per cent annualized growth rate in UAE property prices over the same period, both indicators of increasing capital flow,” Invesco said in a statement.
The study also showed that the UAE is attracting capital from the MENA (Middle East and North Africa) region itself. About a third (35 per cent) of the capital inflow originates from the wider MENA region, while nine per cent comes from other GCC countries. While capital is flowing into the UAE, overall capital in remaining GCC markets including Bahrain, Oman, Kuwait and Qatar, appears to be exiting home markets, making the UAE the key focus for capital flowing into the region.
“Despite positive momentum on capital flow, the UAE’s economic climate is ever evolving and a number of Dubai’s economic challenges remain in the spotlight, certainly around debt restructuring as 2014 approaches. Whether or not the recovery continues into this year and beyond is nearly impossible to predict, but what is clear from the study is that the UAE has been successful in attracting international capital,” said Tolchard.
By Cleofe Maceda Senior Reporter
Gulf News 2013. All rights reserved.
