PHOTO
· 36% of HNWIs see regional economy as worsening, a fourfold increase from the 9% in 2015
· However, 83% are optimistic over 5 year horizon
· Clear shift towards conservative investments: average allocation to cash and deposits up to 24% from 17% in 2015, with 62% of HNWIs expecting to increase this allocation going forward
· Strong HNWI sentiment towards UAE and Qatar
· GCC retains its appeal for HNWIs: 76% of HNWIs say that they prefer to keep their assets close to home
Dubai, UAE - Emirates Investment Bank ("EIBank"), a client-focused, independent private and investment banking boutique headquartered in Dubai, today published the 2016 "GCC Wealth Insight Report" ("the Report"). The Report outlines the views of High Net-Worth Individuals ("HNWIs") from across the Gulf Cooperation Council ("GCC") on local and global economies as well as the main elements that drive their investment and banking decisions.
The GCC Wealth Insight Report 2016 is based on a survey of HNWIs from the United Arab Emirates, Qatar, Kuwait, Saudi Arabia, Oman and Bahrain. Face-to-face interviews were held in each country between September and November 2015 among the national population as well as expatriates. For the purposes of this study, HNWIs are defined as individuals with US$2 million or more in investable assets.
This year's findings show that in what has been a challenging year for the region, with the falling oil price and geopolitical instability, the GCC remains an attractive investment destination for HNWIs. However, there is a clear element of caution lingering amongst investors.
Commenting on the regional economic situation, Khaled Sifri, CEO of Emirates Investment Bank, said, "With the global economy currently going through a period of significant volatility and with depressed oil prices, it comes as no surprise that this year's Report is more sombre than in previous years. However, confidence in markets such as the UAE and Qatar remains very strong and, when taking a longer-term view, HNWI's say they are optimistic about the Gulf region as a whole. Consistent with previous years, the majority of GCC HNWI investors prefer to invest in the region over global markets, despite any geopolitical concerns.
Commenting on wealth decisions and allocations, Khaled Sifri said, "In this year's report, we see a clear shift towards conservative investments, with GCC HNWIs appearing to be more risk averse and adopting a defensive approach to their wealth allocations. This is evidenced in the notable shift this year towards cash and deposits as well as gold and precious metals.
"At Emirates Investment Bank, we advise our clients that the best way to protect and grow their wealth is through diversification - both by asset class and geography. Historically, investors from the GCC prioritised growth and allocated a greater portion of their wealth to investing in their own businesses for future generations. However, as regional economies mature, we should see an increasing interest in alternative investment opportunities as HNWIs seek to construct more balanced portfolios."
Economic sentiment
Views of the economic situation at both a global and a Gulf level are more negative than last year.
At a global level, just 14% say that the current economic situation is improving (down from 31% in 2015), while almost half (47%) think that the situation is getting worse. It is notable that the global economic situation has underperformed expectations from last year's Report, when 52% of investors felt the global economy one year later would be stronger and just 8% believed the situation would get worse. The reality is a definite negative shift in sentiment over the past 12 month.
When asked about the GCC economy, just 17% say that it is improving compared to 55% in 2015. There has also been a fourfold increase in the proportion of HNWIs who say that the economic situation in the region is worsening (36%, up from 9% last year).
While HNWIs are significantly more likely to say that the regional economy is worsening, there is confidence that the situation will improve over the long-term, with the majority of HNWIs optimistic about the economic prospects for both the global economy and the GCC region over the next five years (77% optimistic about global economy, 83% optimistic about GCC economy).
Looking at the individual countries of the GCC, the Report asked HNWIs for their views on the economic situation in their own country. The most positive responses were from the UAE and Qatar, where 58% and 42%, respectively, said they felt the situation was improving (89% and 83%, respectively, in 2015). HNWIs were least positive in Kuwait, Bahrain and Saudi Arabia, where just 8% of respondents in each country said they felt the situation was improving. HNWIs in Oman are most likely to feel that the economic situation in their country is worsening (67%). Saudi Arabia has seen the biggest shift in sentiment, with 59% of respondents in the 2015 Report saying that they felt their economy was improving.
Wealth decisions and financial allocations
The Report suggests that the negative sentiment towards the current situation of both the global and regional economies has affected investment and banking decisions for the majority of surveyed HNWIs. 43% of HNWIs surveyed say the global economic situation has affected their banking and investment decisions, which represents a significant increase in relation to 2015 (28%). Amongst this group, the most commonly cited impact is that investors are more cautious and seeking lower risk (56%) - which is mentioned twice as frequently than in 2015. One in five (21%) say that it has prompted them to reduce (or stop) their global investment exposure. Meanwhile, 51% of HNWIs surveyed say that local economic conditions have affected their banking and investment decisions, an increase from 33% in 2015.
The suggestion that HNWIs are increasingly cautious is supported by the 2016 Report showing greater current allocations by HNWIs to cash/deposits (up to 24% in 2016 from 17% in 2015), and gold and precious metals (up to 9% in 2016 from 5% in 2015). Consistent with previous years, the largest average allocation is to their own businesses (27%).
When taking a longer-term view, seven in ten HNWIs (69%) say that they plan to increase their investment in their own business in the near future. Meanwhile, six in ten (62%) intend to increase their investment in cash/deposits, which suggests that HNWIs expect to remain somewhat cautious in the years to come. HNWIs were most negative towards stocks, with just 20% of HNWIs say they plan on increasing their allocations to stocks, with 33% saying they plan on decreasing their allocations.
HNWIs' planned allocation of wealth in the future shows some interesting changes in relation to last year's Report. There is a notable increase in planned allocations to direct investments / private equity (52%, up from 31% in 2015) and a significant decrease in planned allocations to real estate (51%, down from 81% in 2015), which suggests that HNWIs are increasingly interested in diversifying their portfolios away from the more traditional asset classes towards selective business ventures.
Similar to the 2015 Report findings, a significant majority of HNWIs (76%) prefer to keep their assets closer to home. Amongst HNWIs who prefer to keep their assets close to home, almost half (47%) say this is because they are confident that investments in the region are secure. Other reasons cited include the ability to oversee investments (18%) and familiarity with the risks and regulations (16%).
For the 24% of HNWIs who are global investors, the most commonly given reasons for this relate to diversification and risk management, with HNWIs seeking to protect their assets in the context of instability in the region (42%). Other reasons include a desire to take advantage of global opportunities, having legacy investments overseas, and having a strong knowledge of these markets.
Despite the sense of greater caution, a clear majority of HNWIs (86%) say that they are focused on growing their wealth, rather than adopting a position of consolidation.
-Ends-
Research background
In total, 100 HNWIs were included in the GCC Wealth Insight Survey from the Kingdom of Saudi Arabia (n=26), the United Arab Emirates (n=26), Bahrain (n=12), Oman (n=12), Qatar (n=12), and Kuwait (n=12).
Interviews were held in each country and were conducted face-to-face in Arabic and English among the national population as well as expatriates.
The fieldwork took place throughout the GCC between September and November 2015. For this survey, Ipsos undertook the role of conducting face-to-face interviews and data collection. Brunswick Insight led the
data analysis and presented the conclusion of findings.
The full "GCC Wealth Insight Report" is available on www.eibank.com
Key findings in the 2016 GCC Wealth Insight Report
Current and Future Economic Sentiment
§ 14% say that the global economic situation is improving (down from 31% in 2015, and 30% in 2014), while almost half (47%) think that the global situation is worsening.
§ 17% say the regional economic situation is improving, compared to 55% in 2015. There has also been a notable increase in the proportion of HNWIs who say that the economic situation in the region is worsening (36%, up from 9% last year).
§ Just over three quarters of HNWIs (77%) are at least somewhat optimistic about the economic prospects for the global economy over the next five years, which is consistent with 2014/2015.
§ More than four in five HNWIs (83%) say that they are optimistic about the economic prospects for the Gulf region over the next five years - broadly consistent with 2014/2015.
Attitudes towards banking and investment decisions
§ 43% of HNWIs say the global economic situation has affected their banking and investment decisions, which represents a significant increase in relation to 2015 (28%). However, the impact is lower than in 2014.
o Amongst this group, the most commonly cited impact is that investors are more cautious and seeking lower risk (56%) - which is mentioned twice as frequently than in 2015. One in five (21%) say that it has prompted them to reduce (or stop) their global investment exposure.
§ 51% of HNWIs say that local economic conditions have affected their banking and investment decisions, which represents a significant increase in relation to 2015 (33%).
§ Amongst HNWIs who have been affected by economic issues in the region, 46% cite movements in the price of oil and currency fluctuations.
Geographic preferences
- Three quarters (76%) of HNWIs say that they prefer to keep their assets close to home, rather than being a global investor (24%). This is broadly consistent with results in 2015.
o Amongst this group, almost half (47%) say this is because they are confident that investments in the region are secure. Other reasons cited include the ability to oversee investments (18%) and familiarity with the risks and regulations (16%).
- For the 24% of HNWIs who are global investors, the most commonly given reasons for this relate to diversification and risk management, particularly in the context of instability in the region (42%). Other reasons include a desire to take advantage of global opportunities, having legacy investments overseas, and having a strong knowledge of these markets.
Allocations of wealth
- On average, 27% of an HNWI respondent's portfolio is allocated to their own business (largest allocations), which is down from 33% in 2015. This is followed by real estate as an investment (24%, down from 30% in 2015) and cash/deposits (24%, up from 17% in 2015).
- It is also worth noting an increased allocation to gold/precious metals (9%, up from 5% in 2015).
- As was the case in 2014 and 2015, HNWIs are most likely to say that they would invest excess wealth in real estate (37%) or their own business (30%).
- However, as we see with current allocation of wealth, there is a slight shift in relation to previous years, with HNWIs suggesting they would invest a greater share of their wealth in cash/deposits or gold/precious metals.
- Seven in ten HNWIs (69%) say that they plan to increase their investment in their own business in the near future, while six in ten (62%) intend to increase their investment in cash/deposits.
- Approximately half of HNWIs say they plan to increase the share of their wealth in direct investment/private equity (52%), real estate (51%) and gold/precious metals (49%).
- Just 20% of HNWIs say they plan on increasing their allocations to stocks, with 33% saying they plan on decreasing their allocations.
- As was the case in previous years, a clear majority (86%) of HNWIs say that they are focused on growing their wealth, rather than preserving it.
About Emirates Investment Bank pjsc:
Emirates Investment Bank is an independent private and investment banking boutique operating in the Middle East and headquartered in Dubai, UAE. It offers highly customised services through two primary business lines:
· Private Banking: Emirates Investment Bank works closely with a select yet diverse client base of High Net Worth individuals and institutions to bring them tailor-made wealth planning services and investment solutions sourced from all over the world.
· Investment Banking: Emirates Investment Bank's professional financial advisory team provides its clients with innovative investment banking services including Mergers & Acquisition (M&A), balance sheet restructuring as well as access to regional capital markets.
Emirates Investment Bank is regulated by the Central Bank of the UAE, and as a listed entity on the Dubai Financial Market (Ticker: EIBank), it is also supervised by the Emirates Securities and Commodities Authority. For further information, please visit: www.eibank.com.
The Bank's assets under management as of 31 December 2015 amounted to AED 9.6 billion.
For media enquiries:
Emirates Investment Bank
Rebecca Gordon-Clarke
+971 4 2317 720
Rebecca.Clarke@eibank.com
Brunswick Group
Edward Moore
+971 4 446 6270
EIBank@brunswickgroup.com
© Press Release 2016
