Inflation and Russia-Ukraine crisis top list of global concerns for investors

Majority expect inflation to last more than 12 months, UBS survey finds

A trader at the New York Stock Exchange. Investors in the UAE are concerned about geopolitical risk, market downturn and global trade conflict. Reuters

RELATED: Have central banks left it too late to tame inflation?

Rising inflation and the impact of the Russia-Ukraine war on the global economy are key concerns for high-net-worth investors around the world, according to a new survey by Swiss wealth manager UBS.

About 92 per cent of global investors expect the war to increase inflation, while more than half believe inflation will last longer than 12 months, the UBS Quarterly Investor Sentiment survey found.

However, geopolitical risk, the market's downturn and global trade conflict are the biggest concerns for investors in the UAE, where 85 per cent of respondents to the survey — which polled more than 2,500 investors and 1,000 business owners across 14 markets — expect the war to increase inflation, while 43 per cent believe the rising cost of living will last longer than 12 months.

“Investors globally are clearly concerned about the personal and economic impacts of one of the largest humanitarian crises in decades,” Iqbal Khan, president of UBS Europe, Middle East and Africa, and co-president of UBS Global Wealth Management, said on Thursday.

“The long-term economic implications of the war in Ukraine are difficult to assess, but most investors remain optimistic on their outlook for the stock market and are confident in their well-diversified investment portfolio.”

The Covid-19 pandemic era of low interest rates and fiscal and monetary stimulus is drawing to a close, with rising inflation forcing the US Federal Reserve and other central banks to tighten their monetary policies.

On Wednesday, the Fed increased interest rates by 50 basis points, its most aggressive move since May 2000 to rein in inflation.

The Fed’s move is its second in less than three months as the job market continues to overheat and US inflation reached 8.5 per cent in March, the highest level since 1981.

Concerns about inflation are causing about 52 per cent of investors in the UAE to hold off on big purchases, the UBS survey said.

While 57 per cent of survey respondents in the UAE are highly concerned about the impact of inflation on their retirement savings, 56 per cent are worried about its effect on wealth transfer, it said.

Most investors in the UAE anticipate a negative economic impact from the Russia-Ukraine war, with 67 per cent concerned about increased cyber attacks and more global instability, 64 per cent expecting higher energy prices and 61 per cent fearing the risk of recession, UBS said.

If stock markets decline further, 33 per cent of UAE investors plan to add to their portfolio, while another 30 per cent will shift their investments to different sectors, according to UBS.

About 43 per cent of investors in the UAE are also considering buying cryptocurrencies amid war concerns, while 41 per cent prefer real estate and 40 per cent are choosing to invest in gold, the survey found.

The most attractive investment sectors and themes in the UAE market today include real estate, sustainable investment and health care, it added.

Meanwhile, the main sources of concern for business owners globally include geopolitical instability, rising material costs, tax increases, heightened regulations and supply chain issues, according to the UBS survey.

As a result, confidence in their own businesses for the next 12 months declined 11 percentage points.

In the US, geopolitical risk, politics and inflation are top concerns, with about 60 per cent of investors worried about the war in Ukraine and its effect on their portfolios, according to the UBS survey.

Separately, a majority of independent financial advisers and wealth advisers in the Middle East and North Africa believe the region's asset management sector is growing faster than expected, with 69 per cent saying it will reach $2 trillion in assets under management before 2025, up from $1.2tn in 2020, new research by behavioural finance company Oxford Risk found.

Sixty-two per cent of wealth advisers believe the expansion will be driven by increased international investment in the region, while 52 per cent of respondents said the growing number of high-net-worth and mass affluent individuals is attracting interest from global companies, Oxford Risk said on Thursday.