UAE investors favour govt bonds, saving plans

Investors in the UAE currently prefer to put their money in low-risk assets with government bonds and saving plans, says a report.

According to a new report commissioned by Friends Provident International (FPI) titled Investor Attitudes, even though UAE investors are sceptical about investing in the current global economic climate and market conditions, they prefer to put their money in low-risk assets with government bonds, cash and gold followed by equities and property.

According to the detailed report released to Emirates Business 24-7, bonds are the least desirable asset class, with only one third of respondents agreeing that they are a suitable investment at this time.

Unsurprisingly corporate bonds are the least preferred – perhaps demonstrating that the financial losses suffered by Lehman bond investors in Hong Kong and Singapore are still at the forefront of people’s minds when it comes to investing in such instruments.

The research indicates that investor confidence in the UAE is likely to return soon, with more than half of those surveyed (53 per cent) of the opinion that market conditions will improve within six months.

Only 12 per cent of those questioned expected it to worsen.

Matt Waterfield, general manager (Middle East and Africa), Friends Provident International said: “Optimism amongst investors in the UAE is improving and residents are becoming a little more bullish about investment markets. This in turn means there is an even greater need for careful financial planning."

In terms of investment strategies, 20 per cent of respondents in the UAE said they are investing for the short-term, 12 per cent said they were investing for the long-term and 22 per cent said that they would not invest in the current climate, highlighting the uncertainty in current investor sentiment.

When asked which products respondents currently prefer 55 per cent chose endowments or savings plans, followed by government bonds at 43 per cent, Fixed Term Deposits at 42 per cent, annuities at 34 per cent and corporate bonds at 25 per cent.

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.

Interestingly, the research highlighted that 57 per cent of investors in the UAE rely on friends or family for financial advice.

The research for the report was conducted in the UAE, Hong Kong and Singapore, and it details the investment strategy of over 2,750 respondents, their current view of investment market conditions, their attitude towards risk and their investment time horizon.

Interestingly, in terms of investing for the future, all three regions selected endowments as their top choice of investment vehicle.

Investors based in Hong Kong and Singapore have similar investment strategies with nearly half of those surveyed preferring short to medium-term investments.

Matt Waterfield said: "Attitudes have certainly changed over the past year and investor caution has resulted in savings plans and government bonds becoming the top choice of investment.
“When planning medium to long-term investments, investors are being more selective and are carefully researching their options. This is a very good practise to undertake. When managed properly there are still good opportunities to invest and earn returns."

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