A sense of increased optimism and confidence has been noticed among the region’s wealthy in the context of the regional economy, according to a new report.
The sixth edition of the report is based on an independent survey of high net worth individuals (HNWI) from across the Gulf Cooperation Council (GCC) conducted in November 2018.
The report was made by Emirates Investment Bank (EIBank), an independent private bank based in the UAE, and is titled “2019 GCC Wealth Insight Report”.
This edition takes a more tailored approach to the unique dynamics of the GCC investment landscape, where a higher representation of GCC nationals (90 per cent), entrepreneurs and business owners (64 per cent) was included in the survey, offering a more home-grown view of the outlook for the region and the investment sentiment among its HNWIs.
Key highlights
The 2019 report shows that HNWIs in the GCC are much more positive about the condition of the global economic situation today than they have been in the last three years. Higher oil prices, at the time of the survey, and increased investment opportunities were highlighted as the main factors for optimism. Nearly half (45 per cent) of the respondents believe the global economic situation is improving, and more than three quarters of HNWIs (85 per cent) are optimistic about the economic prospects for the global economy over the next five years.
In addition to the optimism towards global economic growth, confidence in local and regional growth is more prominent and is strengthening in 2019. Views of an improved economic and business environment in the GCC more than doubled among HNWIs, leaping from 31 per cent to 71 per cent of respondents, with just three per cent instead of last year’s 41 per cent feeling that the situation is worsening. The vast majority of HNWIs (96 per cent) surveyed are optimistic that stabilised oil prices, upcoming high-profile events, and the benefits of economic diversification and reforms will induce a robust environment for businesses.
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This positive sentiment has prompted HNWIs to continue to keep their assets closer to home, in line with previous years, with an even further increase in wealth allocation towards their own businesses. Preference for investing locally was also prominent in this year’s report, where three quarters of HNWIs believe that investment opportunities in their home markets are more lucrative than diversifying abroad. In addition, a large proportion of the 84 per cent of respondents who said that they have changed their investment approach as a result of geopolitics, have decided to focus more on investing in their local markets.
This year’s report shows a significant increase in HNWIs’ tendency (91 per cent) to accumulate wealth, as opposed to preserving it, and yet nine in 10 respondents categorise themselves as conservative investors. While this contradicts the conventional “wealth preservation” model that conservative investors would typically follow, it perfectly conforms with GCC HNWIs’ preference to invest in their home markets and in their own businesses — both perceived as a low-risk investment decision, as opposed to markets or asset classes that they are not familiar with.
On the other hand, global investors (22 per cent) say that they are inclined to seize opportunities abroad, with 45 per cent of global investors naming Asia as a favourable investment destination now and over the next five years — a similar trend to the last five years.
While real estate continues to receive considerable exposure from GCC HNWIs (70 per cent), technology is emerging as a sector of interest for regional investors, with a quarter of them currently allocating wealth to technology and as many saying they will increase their exposure to this sector in the coming 12 months. Respondents cited the sector’s growing importance in the next phase of growth across multiple industries as the fundamental factor for this view.
Commenting on the Report, Khaled Sifri, CEO of Emirates Investment Bank, said, “The size of home-grown wealth in the GCC region and the entrepreneurial culture it is known for gives the investment landscape in the region a unique characteristic."
"This explains the increased optimism and confidence we saw in this year’s findings, and the growing appetite among the region’s wealthy to grow their wealth instead of preserving it, compared to last year where there was an increase in wealth preservation over previous years. Add to this a clear preference to deploy capital in their own markets and businesses," he added.
In addition to economic diversification plans and reforms, the approaching launch of flagship events, such as the Special Olympics World Games Abu Dhabi 2019 and Expo 2020 Dubai, is driving positive sentiments among regional investors, particularly in the UAE, which is offering incentives to investors and to high calibre talent to partake in its transition to a knowledge-based economy, he said.
"As GCC HNWIs continue to focus on regional markets, they are increasingly looking at opportunities in the technology sector as an attractive asset class for their future investments,” he added.
