UAE investors look to stocks and property to hedge against inflation

Covid-19 is the top concern for local investors, followed by climate change and cyber security, new survey finds

Emirati traders check stock market prices. About 47 per cent of UAE investors intend to increase their allocation to equities in the coming six months, according to a UBS survey. AP

About 46 per cent of UAE investors expect inflation to pick up over the next 12 months while 92 per cent believe it will affect their portfolios, according to new research by Switzerland-based investment bank UBS.

The sentiment corresponds with investors globally, with 46 per cent saying that inflation will rise over the next 12 months and they plan to adjust their portfolios by buying more stocks and property assets, according to UBS's quarterly global Investor Sentiment survey.

The Swiss bank surveyed 2,999 investors with at least $1 million in investable assets and 1,201 business owners with at least $1m in annual revenue and at least one employee other than themselves from June 23 to July 12 across 15 markets, including China, Germany, Singapore, Switzerland, the UAE, the UK and the US.

Globally, central banks and governments have pumped $25 trillion into their economies to soften the blow of the pandemic. However, the flow of money has raised concerns about rising inflation, with economists expecting upward pressure on prices during the summer as countries reopen amid easing Covid-19 restrictions.

“Investors in the UAE are looking for investment opportunities to protect their purchasing power against inflation, with many eyeing real estate and sustainable investments,” said Ali Janoudi, head of wealth management Middle East and Africa at UBS.

“They are also optimistic about their own region’s economy. We believe a continued risk-on stance in equities is warranted and sustainable investing is our preferred approach to investing globally.”

To counter inflation, 35 per cent of UAE investors said they are interested in property while 34 per cent are considering sustainable investments and 32 per cent are considering hedging their portfolios, the survey found.

Additionally, 83 per cent of UAE investors have expressed confidence in the stock market and 47 per cent said they intend to increase their allocation to stocks in the coming six months.

Other top concerns for UAE investors include Covid-19 (66 per cent), climate change (62 per cent) and cyber security (61 per cent), the UBS survey said.

“Although we expect the recent rise in inflation to ease, the outlook for inflation remains uncertain and therefore building inflation protection into portfolios is an appropriate step for investors to be taking now,” said Tom Naratil, president of UBS Americas and co-president of UBS Global Wealth Management.

“This includes investing in commodities, private market infrastructure and stocks with pricing power, as these areas tend to perform better in an inflationary environment and will help to preserve purchasing power over the long term.”

About 35 per cent of global investors plan to add stocks while 33 per cent plan to add precious metals, 32 per cent plan to make sustainable investments and 32 per cent are looking at property, the UBS survey found.

Although inflation is a concern, seven in 10 investors are optimistic about their own region's economic prospects over the next 12 months while 67 per cent are bullish are the performance of the stock market over the next six months, the study found.

Globally, business owner optimism also remained high but dipped slightly by three percentage points, with 77 per cent remaining positive about their own business over the next 12 months.

Plans to hire also fell, with 35 per cent planning to actively recruit employees, compared with 37 per cent in the first quarter, according to UBS.