The United Arab Emirates (UAE) is still the main beneficiary of inflows of private capital into the GCC region (Gulf Cooperation Council) as it increasingly gains the ‘safe haven’ status, according to a research from investment management firm Invesco.
In its fifth annual Invesco Middle East Asset Management Study, the firm said the UAE saw total private capital inflows of 81% on a net respondent view basis in 2014, compared to 52% last year.
According to the 2012 study, the increasing flow of assets from MENA region into the UAE was a result of the Arab Spring, and this year’s research findings confirmed this trend, Invesco said.
Source: Invesco
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By GlobalData"Our study shows that political stability is a hugely important factor in driving the direction of private capital flow and the UAE is clearly considered a ‘safe haven’ amidst geopolitical upheavals in the region and beyond," said Nick Tolchard, head of Invesco Middle East.
Unsurprisingly, over half (58%) of this capital was seen to be coming from emerging markets, including Russia and Africa.
Invesco’s study respondents cited an increase in Russian/CIS assets flowing into the region from 10% in 2013 to 17% in 2014.
According to the research, this capital inflow increase was primarily due to the Crimean Crisis with 30% of respondents citing local political stability as the key driver.
Additionally, the study revealed that the flows of private capital from Africa are up to 9% in 2014 from 3% in 2013.
However, Tolchard said: "Beyond short term trends, there are strong structural reasons for choosing the UAE as a financial centre.
The fact that many respondents attributed capital inflows to local investment opportunities shows that the UAE is becoming an increasingly attractive investment destination in its own right."
This year, 33% of respondents have, in fact, identified local investment opportunities as the most important factor driving capital, compared to 29% in 2013.
Another trend identified in the study is the shift from Switzerland to Singapore across a range of GCC markets and client segments. A major reason for that is the regulatory change linked to transparency and disclosure in Switzerland, respondents said.
In the UAE, 5% of assets leaving the country were allocated to Singapore, compared to 1% last year. At the same time, assets allocated to Switzerland reduced from 10% in 2013 to 4% in 2014.
Source: Invesco