After two months of pain across global financial markets - with almost no asset class left untouched - it is probably time to sift through the wreckage and see if the next group of winners is going cheap.
Of course, the risk is that we are now in a long-term bear market with a normalisation of interest rates bringing about a lengthy period of stagnant to falling economic growth and declining asset values.
But let’s not forget that President Donald Trump will want to get re-elected in a couple of years, and that China’s President Xi is also an astute businessman as much as a powerful politician with a job-for-life.
Interest rates are not about to shoot through the roof and while trade tariffs make for big headlines, they still have a marginal impact on overall trade flows.
Consider, for example, how Chinese trade with the US has reached new highs this year despite new tariffs and the threat of more.
Even in the global financial crisis of 2008-09 the autumnal US equity shock eventually hit rock bottom the following March, and hardly looked back for the next decade.
Being too pessimistic when prices are low can be an expensive error. That’s when the best bargains occur.
For example, Dubai billionaire Khalaf Al Habtoor adeptly snapped up what is now the Ritz-Carlton in Budapest during a property crash for an estimated $80 million in 2012, a bargain indeed.
Warren Buffett is always the loadstar for US markets. He’s been buying up US bank stocks over the past year and increased his purchases during the market downswing this autumn.
Forty per cent of his $200bn portfolio is now held in seven of the top 10 US banks: Wells Fargo, US Bancorp, Goldman Sachs, Bank of New York Mellon, PNC Financial, JPMorgan and Bank of America.
He makes no comment on why. But analysts note that bank stocks are less risky due to regulatory changes after the financial crisis and will benefit from rising interest rates.
They also sell on an average forward price-to-earnings ratio of 10 compared with the market average of around 16, so arguably they are a rare bargain in a still highly priced US stock exchange.
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Other analysts have been recommending the fallen tech stars of FAANG fame (Facebook, Apple, Amazon, Netflix, Google), although the general consensus is that at least the first three still look expensive.
Sitting in the UAE looking out to sea in the storm last week I could not help but think nature was a bit of a parody on local markets.
It all appeared pretty violent for a time with lightening flashing and the rain pouring down. But really what was the chance of the sun failing to shine the next day?
Sure the oil price took a 30 per cent thrashing in the autumn sell-off. Was this anything more than a dip after the tripling of the oil price from the lows of four years ago?
Did this actually undo the huge bonus this has meant for the Gulf oil states this year?
Well, it certainly failed to stop the total value of Dubai real estate transactions surging 56 per cent year-on-year in the third quarter to Dh15.7bn, with residential property driving the increase.
Price rises are elusive. But a higher sales volume is the usual frontrunner for higher prices.
Then there was the announcement on long-term visas for high net worth investors in UAE property, another shot in the arm for real estate, this time in the Dh5m upwards bracket that has been struggling since the mortgage cap in December 2013.
Last week, I argued that the four-year UAE real estate downcycle was close to or actually at the bottom. Was this the turning point?
Look too at Emaar Properties selling five hotels to finance new development, or Canadian giant Brookfield's talks with Dubai's Meraas about buying a stake in this developer.
UAE equities have also been trading at multi-year lows, another anomaly if oil prices rebound.
Even the most pessimistic of asset price forecasters tip certain emerging market equities alongside cash as the best thing to own for 2019. Try Brazil, Thailand, Indonesia, India, Peru, Hungary or Poland.
Tumbling London house prices and the pound sterling might also tempt you.
A two-bedroom, two-bath, sub penthouse in Chelsea caught my eye this week; the price slashed from £1.38m (Dh6.46) to £1m.
‘Motivated sellers’ are the poor guys to watch out for. They have usually over borrowed at the top of the market and are now forced into a liquidation situation at precisely the worst time.
Finally, note that gold strongly outperformed stocks in the autumn asset sell-off, and that could be a flag for higher prices next year. Bitcoin, on the other hand, proved to be the 'rat poison' that Warren Buffett derided earlier in the year and plunged to new lows.
Peter Cooper has been writing about Gulf finance for 20 years
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
UAE currency: the story behind the money in your pockets
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
KILLING OF QASSEM SULEIMANI
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Aldar Properties Abu Dhabi T10
*November 15 to November 24
*Venue: Zayed Cricket Stadium, Abu Dhabi
*Tickets: Start at Dh10, from ttensports.com
*TV: Ten Sports
*Streaming: Jio Live
*2017 winners: Kerala Kings
*2018 winners: Northern Warriors
A list of the animal rescue organisations in the UAE
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
BIGGEST CYBER SECURITY INCIDENTS IN RECENT TIMES
SolarWinds supply chain attack: Came to light in December 2020 but had taken root for several months, compromising major tech companies, governments and its entities
Microsoft Exchange server exploitation: March 2021; attackers used a vulnerability to steal emails
Kaseya attack: July 2021; ransomware hit perpetrated REvil, resulting in severe downtime for more than 1,000 companies
Log4j breach: December 2021; attackers exploited the Java-written code to inflitrate businesses and governments
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