Abu Dhabi Islamic Bank has unveiled what it claims is a risk-free investment vehicle that will buy up shares of automobile makers including Toyota, GM, Volkswagen, Honda, and BMW amid an economic recovery that has pushed up demand for cars in the United States and Asia.
The structured note, which hedges against losses through the use of financial derivatives such as options, offers, ADIB claims, investors an assurance that they will get their money back if the investments go sour. The Sharia-compliant note matures in one year and may return up to 8 per cent. The minimum subscription is US$30,000, the bank said.
“We’re finding that our customers now have increased appetite for global equities, but are still slightly risk-averse given the global economic uncertainty,” said Daffer Faroq Luqman, the global head of liabilities and wealth management at ADIB. “Such capital protected notes are therefore popular because they are very low-risk, while offering the prospect for a decent return in the current low-interest rate environment.”
US automakers last year had the best sales since 2007 according to data compiled by Bloomberg. US car sales industrywide increased 7.6 per cent last year to 15.6 million as the three biggest car makers – Ford Motor, Chrysler Group and General Motors – turned a corner after battling for survival during the financial crisis that broke out in 2008.
Toyota, the world’s biggest car maker, and Honda Motors recorded sales in China last year, the largest market for cars in the world. Toyota’s China sales advanced 9.2 per cent to 917,500 vehicles last year, while Honda’s sales rose 26 per cent to 756,882 vehicles. Shares of Toyota rallied 60 per cent last year, while Honda advanced 38 per cent.
Adib and other UAE banks are bolstering their wealth-management offerings as more clients seek to diversify their stock holdings after Dubai’s main benchmark index more than doubled last year and Abu Dhabi’s key stock gauge advanced 63 per cent.
The bank said its oil and gold structured notes have been particularly popular with its customers.
Three gold notes with varying degrees of risk that matured last year generated returns of 15 per cent, 6 per cent and 4 per cent. The two oil-structured notes that matured last year gave back 17.9 per cent and 1.21 per cent.
mkassem@thenational.ae