Hope after the landslide



This summer's market meltdown erased two US investment banks from the map, forced those remaining to overhaul their business models and left the world's largest insurer, AIG, in need of a last-ditch bailout. Oh, and the US government took over Fannie Mae and Freddie Mac, America's largest mortgage guarantors, arranged a fire sale of Washington Mutual, one of the largest banks in the US, and announced plans for a massive olive branch to Wall Street intended to cleanse the system of toxic debt.

That was scary stuff - and a lot of news for investors to absorb. As the carnage spread, few assets seemed safe, and those that did became expensive as the erstwhile risk-happy crowd flocked to US Treasury bills and cash. Stock markets got pummelled as a result. Indexes in the US last month declined to levels not seen in five years. Markets in the Gulf have suffered, too, dropping upwards of 50 per cent as jittery foreigners cashed out.

Now, as the summer of chaos morphs into what could easily be a winter of discontent, it may be a good time to look for gems among the rubble. Because let's face it: while companies across the board have seen their stock prices decline significantly, most of these enterprises clearly won't go the way of Lehman Brothers or Merrill Lynch. Moreover, an old maxim of investing says that you should be fearful when others are greedy, and greedy when others are fearful. If that's the case, now is definitely a time to be greedy. But greedy for what?

The argument Among emerging markets, Brazil and Russia look like the best bargains, analysts say. As part of the big four of the developing world - the others are India and China - they make a massive footprint on the world's economic stage. And stocks in these countries cheapened considerably during the summer turmoil. Russian companies lost roughly 78 per cent, while Brazilian firms got nipped for 60 per cent, putting both markets on sale for less than half price. Russia is the riskier of the two, the shaky political situation there being the main reason, but both offer good prospects as oil prices stabilise and global demand for Russian and Brazilian agricultural products soars.

Russia is the riskier of the two, the shaky political situation there being the main reason, but both offer good prospects as oil prices stabilise and global demand for Russian and Brazilian agricultural products soars. "Brazil is healthy," says Kurram Jafree, the head of investment management at Barclays Wealth in the Middle East. "Metals and mining make a large percentage of gross domestic product, so if you want to play on commodities prices, that's a good way. The market has been on a roller coaster, and if risk aversion falls, that's the kind of market within emerging markets that's going to rally." The way in A diversified emerging market fund with exposure to Russian and Brazilian assets accomplishes it in one swoop.

American Funds New World (NEWFX) is a solid choice, with an expense ratio below one per cent per year and returns that bested the MSCI emerging markets index by more than five per cent a year for the past five years. Its top holdings include the Russian fertiliser manufacturer Uralkali, the natural gas giant Gazprom and Brazilian Petroleum. If you would rather take a gamble with country-specific investing, look to exchange-traded funds, or ETFs, like iShares MSCI Brazil Index (EWZ) or Market Vectors Russia (RSX). ETFs are indexes that trade on an exchange like stocks, which makes them great options if you want a low-cost, passive way in. Expenses are low and you get a broad, diverse index of companies in each country. Keep in mind, though, that investing in these countries carries real risks, especially if you go with a concentrated fund like one of the ETFs above. According to a Citigroup estimate, foreigners took US$25 billion (Dh91.8bn) out of Russian stocks over the summer, and the country's simmering conflict with Georgia has not helped investor confidence. About 75 per cent of Russian stocks are in the oil and metals sectors, too, which makes oil's recent price declines all the scarier for investors.

According to a Citigroup estimate, foreigners have taken $25 billion out of Russian stocks over the summer, and the country's simmering conflict with Georgia hasn't helped investor confidence. About 75 per cent of Russian stocks are in the oil and metals sectors, too, which makes oil's recent price declines all the scarier for investors.

The argument Stock valuations across developed countries in the euro zone have declined to a point where some market watchers are beginning to see an upside. The FTSE 100, an index of large stocks listed in London, has declined roughly 29 per cent from a high of 6,376.50 in May. Broader European indexes have dipped even more, by about 32 per cent. In a strategy note on the region released in September, the investment bank Morgan Stanley said its "composite valuation indicator" - a mash-up of the most common ways of valuing stocks - reached its lowest point in its history, even below where it was after the recession of 1987 and at the end of the tech-stock bubble in 2000. "There is a good chance that the low point of this bear market has been reached," the report said. Separately, a survey of fund managers by the brokerage Merrill Lynch found that many believed euro zone stocks were the most undervalued in the world, even though they saw European stocks as having the least favourable outlook for corporate profits. That all points to the main risk of investing in Europe now: things could clearly get worse.

The way in In uncertain times like these, nothing but a diversified portfolio will do. Insurance companies, mining operations and energy firms in Europe look particularly cheap right now, but staking your investing future on these slices of the market, when the very nature of the market appears to be in flux, is probably not good advice. So go for diversified European mutual funds with managers used to finding value. BlackRock EuroFund (MDEFX) is one such fund. It comes with a reasonable 1.2 per cent expense ratio, although you will pay a 5.25 per cent load when you buy new shares. Mutual European (TEMIX) is another strong choice. It has racked up returns of almost 12 per cent annually over 10 years, and is ahead of its index this year by a whopping 13.3 percentage points.

The argument No region has taken more of a beating than North America, at least in the eyes of global investors seeking a scapegoat for the downturn. This makes sense, given that the subprime mortgage crisis that touched off the credit crunch, and eventually the financial meltdown, started there. That dent in America's financial armour has also meant that American stocks - or at least some of them - are trading at bargain basement prices. The legendary investor Warren Buffett has seized on the impressive cheapness of American companies, snapping up a sizeable portion of the investment bank Goldman Sachs for US$5 billion (Dh18.36bn) in September. Nevertheless, it is a dizzying time to think about investing anywhere in or near the US financial system. Projections almost universally paint a picture of steady declines across the economy for the next few quarters before a recovery begins. But if you have the guts and plenty of time to see your investment play out, analysts point to solid companies across the spectrum that have held up well despite the recent hammering. Most fund managers in Merrill Lynch's September survey were not so bullish about banks, insurance companies, and energy and utilities stocks. But they see plenty of upside for boring old consumer staples companies and tech stocks.

Nobody can be sure, however, when a recovery will happen (no, you can't time the market, unless your name is Marty, you drive a Delorean and you just got back from the future). If you have the guts -and plenty of time to see your investment play out - analysts point to solid companies across the spectrum that have held up well despite the recent hammering. Most fund managers in Merrill Lynch's September survey were not so bullish about banks, insurance companies and energy and utilities stocks. But they see plenty of upside for boring old consumer staples companies and tech stocks, which have endured a long stretch of slow growth.

The way in This is a time when money managers who search out value - people who look for cheap stocks - have an edge. Ideally, you should be buying mutual funds that passively track major indexes such as the S&P 500 or the Russell 3000 instead of taking bets on sectors. The biggest index fund in the universe is also one of the cheapest - the Vanguard 500 Index (VFINX) will run you a mere 0.15 per cent per year in expenses, and as is always the case with Vanguard's line-up, you will not pay a dime in sales costs. If you insist on active management, you have a plethora of value-orientated American mutual funds to choose from. Dodge & Cox Stock (DODGX) is a perennial favourite, as are Muhlenkamp (MUHLX) and Sound Shore (SSHFX).

The UAE markets, like other emerging markets, are still a risky bet. Volatility has surged amid the global economic crisis, and major indexes across the region have lost upwards of 30 per cent. Yet some analysts do sniff bargains at these levels, mainly in the property and construction sectors. The Abu Dhabi property developer Aldar, for example, is trading at less than three times next year's earnings, a ridiculously low price for what most analysts consider a well-run company - all seven analysts who cover the stock rate it a "buy". Arabtec, a large construction outfit, has also raised interest with its 77 per cent drop in share price and price-to-earnings multiple of 2.9. All 11 of the analysts who cover it rate it a "buy". In the UAE, as in America, Europe and just about everywhere else, markets are not going up. Yet you are not out of opportunities. It may be hard to muster up the courage to invest these days, and it's true that nobody knows exactly what the future holds. If you can overcome your understandable reluctance to be in the market, though, history is on your side. Investors at the bottom have long outclassed those who got in on the upswing or near the top. If you had bought Dh10,000 in US stocks in Dec 1987, for example, a couple of months after the October crash, you would have a kitty worth Dh31,576 today. If you had waited a year out of fear, you'd still have a lot - about Dh24,250 - but not as much as if you had the guts to go in when things looked bad.

afitch@thenational.ae

How to avoid crypto fraud
  • Use unique usernames and passwords while enabling multi-factor authentication.
  • Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
  • Avoid suspicious social media ads promoting fraudulent schemes.
  • Only invest in crypto projects that you fully understand.
  • Critically assess whether a project’s promises or returns seem too good to be true.
  • Only use reputable platforms that have a track record of strong regulatory compliance.
  • Store funds in hardware wallets as opposed to online exchanges.

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.”

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
​​​​​​​Fuel consumption, combined: 10.5L / 100km

Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
  • Stay invested: Time in the market, not timing the market, is critical to long-term gains.
  • Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
  • Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
 
 
Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Revibe%20%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Hamza%20Iraqui%20and%20Abdessamad%20Ben%20Zakour%20%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Refurbished%20electronics%20%0D%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2410m%20%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFlat6Labs%2C%20Resonance%20and%20various%20others%0D%3C%2Fp%3E%0A
Vidaamuyarchi

Director: Magizh Thirumeni

Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra

Rating: 4/5

 

The specs
Engine: 77.4kW all-wheel-drive dual motor
Power: 320bhp
Torque: 605Nm
Transmission: Single-speed automatic
Price: From Dh219,000
On sale: Now
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%201.8-litre%204-cyl%20turbo%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E190hp%20at%205%2C200rpm%0D%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20320Nm%20from%201%2C800-5%2C000rpm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESeven-speed%20dual-clutch%20auto%0D%3Cbr%3E%3Cstrong%3EFuel%20consumption%3A%3C%2Fstrong%3E%206.7L%2F100km%0D%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh111%2C195%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%3C%2Fp%3E%0A
Mane points for safe home colouring
  • Natural and grey hair takes colour differently than chemically treated hair
  • Taking hair from a dark to a light colour should involve a slow transition through warmer stages of colour
  • When choosing a colour (especially a lighter tone), allow for a natural lift of warmth
  • Most modern hair colours are technique-based, in that they require a confident hand and taught skills
  • If you decide to be brave and go for it, seek professional advice and use a semi-permanent colour
APPLE IPAD MINI (A17 PRO)

Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits

Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine

Storage: 128/256/512GB

Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4

Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps

Biometrics: Touch ID, Face ID

Colours: Blue, purple, space grey, starlight

In the box: iPad mini, USB-C cable, 20W USB-C power adapter

Price: From Dh2,099