Investor confidence has rocketed in the United Arab Emirates across all asset classes excluding collectables, a survey has found. Yet investors still show doubts over pensions and savings, it continued.
 
The Friends Provident International Investor Attitudes Report, the second of its kind, questioned 502 high net worth expats in the UAE who have $4,000 disposable income per month or a lump sum of $100,000 of investable assets. Hong Kong and Singapore were also surveyed, making up a total of 1,562 respondents.

Investor Confidence in Gold and Property

Some 76 per cent of UAE-based investors believe their local investment market has improved over the last six months, and the same number believe markets will continue to improve over the next six months.

“It is good to see that the Friends Investor Attitudes index for UAE has eclipsed the indices for both Hong Kong and Singapore. This reinforces the generally positive consumer sentiment that has been reported in the country as of late. People are obviously more confident in the long-term future of the market here,” said Matthew Waterfield, FPI’s general manager for the Middle East and Africa.

The biggest upswing in confidence was seen in property and gold, with a 16 per cent and 11 per cent increase respectively, compared to the previous survey’s findings from the last quarter of 2012. Property as an asset class was generally viewed as both a short term investment and for retirement, while gold was said to be something relatively easy to understand and easily monitored in terms of value.

“Whilst gold and property remain the most popular asset classes by some distance, it is good to see such positive sentiment towards almost all other asset classes. The large increase in the preference for equities is a sure sign that investors have more confidence in the market, and are willing to take at least some risk to secure a good return on their investment,” said Waterfield.

There was a significant increase in confidence in bonds, equities and money/currency markets, while collectables slightly decreased.

Investment Strategy

As in Hong Kong and Singapore, the most popular investment strategy is balanced managed. Some 35 per cent of UAE respondents preferred to diversify their investments by asset class, compared to 16 per cent by geographic region; some 36 per cent adopted a capital preservation strategy.
 
“It’s good to see that most investors are adopting a balanced, diversified approach to investing. Interestingly, of the three regions surveyed, UAE respondents appear to be least inclined to invest in more ‘risky’ assets, instead preferring to invest in products designed to preserve their capital. This is possibly due to the fact that the people surveyed in the UAE are expatriates and therefore do not have the safety net available to locals in the other regions, such as support from the family should their investments fail,” said Waterfield.

This group showed the highest proportion of individuals, 33 per cent, saying they are not confident to invest without the help of a financial advisor, perhaps explaining why they steer away from riskier assets, he added.

Not So Financially Secure

Despite improved investor confidence and wealth levels of these individuals, only 53 per cent of affluent UAE respondents say they feel financially secure, which was reflected across all three regions surveyed.

In terms of planning ahead, 49 per cent said they were not saving enough for their retirement, and most from this segment felt they needed to increase their savings by between 20 and 40 per cent to bridge their personal savings gap. Despite the trend to seek financial advice when investing, only 8 per cent of respondents had worked with a financial advisor to determine a realistic figure for their retirement.

“The fact that almost half of the respondents say they are not saving enough for their retirement is quite disturbing. In cosmopolitan UAE, where the respondents are all expatriates from many different countries, it is almost impossible to say how much is required for a comfortable retirement when people leave the UAE and for the most part return to their country of origin. However, it is highly unlikely that the end of service benefit employees receive on retirement will be enough to maintain their standard of living when they finish working,” Waterfield warned.

The survey took place between February and March 2013 by Ignition House, a specialist financial services market research agency, and SKOPOS, a multi-country market research consultancy, specialising in the digital space.

Friends Provident International provides life assurance and investment products in Asia, the Middle East, the UK, Europe and other selected markets, and is part of the Friends Life group.