UAE Investor Confidence Drops

Investors in the country have become more cautious this year and are adopting long-term strategies, says FPI.

Investors in the UAE have seen a slight drop in confidence compared to the fourth quarter of 2011, mainly due to the European sovereign debt crisis, and the “unpredictable” political situation in the MENA region, according to the latest Friends Provident International (FPI) Investor Attitudes Report. However, UAE investors are much more positive compared with investors in the other countries such as Singapore and Hong Kong, said the report.

Investors in the country have also started adopting a more cautious approach, and many are looking at long-term strategies, said the report. The percentage of respondents opting for a ten-year-plus strategy almost doubled since the fourth quarter of 2011.

“The drop in investor confidence is leading UAE investors to plan for the long-term, which can only be a good thing,” said Matthew Waterfield, general manager, MENA at FPI in the report. “It is pleasing to see that respondents are taking a responsible approach to investing during times of uncertainty,” he said.

“I am concerned though that, despite a growing maturity among UAE investors, many respondents selected investment funds’ past performance as the top factor influencing their fund selection,” he said.

When choosing investment funds, 58 per cent of UAE respondents view past performance as the number one criteria, followed by risk ratings (56 per cent) and fund charges (41 per cent).

According to the report, although cash and gold remain the preferred asset classes in the UAE, their popularity has declined slightly since the last quarter.

While interest in equities/shares has predictably fallen, the preference for investing in collectables, such as works of art, classic/vintage cars etc – which was on an upward trend in the UAE since the third quarter of 2010 – has plummeted and this is now the least preferred asset class.

Confidence in both the current and future UAE investment market has dropped, with just 30 per cent of investors viewing the current market as improving.

Not surprisingly, the report found that affluent respondents were more likely to invest outside the Middle East, to mitigate the impact of political changes in some countries in the region.

“I would urge investors to take appropriate independent financial advice, to ensure their investment choices are a good match to their appetite for risk and their aspirations,” Waterfield said in the report.