Cautious UAE investors take shelter in gold, cash

A significant majority of UAE investors prefer to hold gold and cash over other asset classes in the current investment climate, according to a survey of investor attitudes in the three global markets of the UAE, Hong Kong and Singapore.

According to the second investor attitudes report by Friends Provident International (FPI), UAE investors remain sceptical about investing with UAE the least optimistic of the three countries surveyed as far as investment sentiment is concerned.

The report shows that cautious UAE investors prefer to put their money in low-risk assets. The report has revealed a significant increase in the percentage of respondents who feel that gold is the most suitable asset class in the current climate, closely followed by cash.

The Friends Investor Attitudes Index for the UAE has moved a notch up to seven in this wave (Q3). “Overall, the Index has seen a slight improvement for the UAE and now stands at 7 – up from 6 in the first wave. This statistic, combined with similar overall results from the first wave is a sign that the region’s investment markets could be beginning to stabilise, without any drastic shifts in either direction,” said Matt Waterfield, General Manager (Middle East and Africa) at FPI.

“It is interesting to see the increased preference for gold as a safe haven asset. This is consistent with the strength of the gold price over the last quarter,” he added.

However, the majority are still cautious about investing in the current climate. “With not very encouraging forecasts for the UAE’s two main economies (Dubai and Abu Dhabi), it is not surprising that there are only slightly more than a third of UAE investors who believe that the current market has improved over the last six months,” the report states.

Accordingly, the UAE investor index for holding gold as a preferred investment vehicle has moved from 16 in the second quarter to 24 in Q3 while for cash, it has declined from 27 to 24 in the same period.

Interestingly, there is a positive shift towards investing in property (from negative 2 to positive 4) during the quarter. The report speculates that this might be due to some investors taking advantage of the declines in house prices.

In an encouraging sign, UAE investors are more optimistic about the future as nearly half (48 per cent) feel that the investment market in the UAE will improve over the next six months although in wave 1 (Q2), slightly more respondents (53 per cent) thought this.

“It just goes to show that investor confidence is a fragile thing. Whilst our research shows that the markets are becoming more stable, investors appear even more uncertain about the future, and are continuing to invest in ‘safe haven’ assets,” added Waterfield.

A third of UAE investors profess to be risk averse, the highest proportion of risk averse investors of the three regions. Their preferred investment instruments are endowment savings plans and government bonds, highlighting their preference for low to moderate risk investments.

Generated through online interviews conducted by ICM Research in three of FPI’s key markets, the report’s findings detail the investment strategy of over 2,750 respondents (752 from the UAE), their current view of investment market conditions, their attitude towards risk and their investment time horizon.

In terms of investment strategies, 22 per cent of respondents in the UAE said they are investing for the short-term, 11 per cent said they were investing for the long-term and 21 per cent said that they are not interested in investing, or would not invest in the current climate, highlighting the continuing uncertainty in investor sentiment.

When asked which investment vehicles they prefer, respondents selected endowments – or savings plans – as their first choice, with 52 per cent of those surveyed preferring them over government bonds, fixed term deposits, annuities and corporate bonds.

Consistent with the first survey, a large proportion (62 per cent) of people surveyed in the UAE believe that it is important to use ethically screened investments, including Sharia’h compliant products

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