- MENA region predicted to see inflow of international capital on the back of low valuation of markets and continuing high oil prices
- Strong returns for investors committing to â€˜emergedâ€™ markets
- Emirates NBD encourages MENA-based investors to bias asset holdings to emerging markets
- Growth potential to be impacted if emerging economies introduce substantial capital controls
Investors committing themselves to emerging markets can expect to see strong returns on their investments, according to Emirates NBD, a leading bank in the region.
According to the bankâ€™s outlook, emerging markets will further outperform the developed markets in the future, and MENA-based investors should bias their asset holdings to the emerging and frontier markets away from the developed world, to obtain optimum returns on their investments.
The forecast was provided by Gary Dugan, Chief Investment Officer and Acting General Manager, Private Banking at Emirates NBD. He said: â€œWe strongly believe that many emerging markets have emerged and therefore warrant a higher percentage of investor portfolios.â€
Commenting on the future of regional economies, Dugan said he believed that the MENA markets would benefit from global investors allocating more of their investments to the emerging and frontier markets.
â€œGiven the relatively low valuation of the MENA markets, we expect them to attract significant international capital in the near future. The continuing high oil prices and the considerably high bond yields currently available in the regional markets will further encourage capital inflows to the region, since investors can expect higher returns on their investments,â€ he said, speaking to media on the sidelines of Emirates NBDâ€™s investor road show in Abu Dhabi.
Dugan said the recent substantial quantitative easing announced by the US Federal Reserve will also lead to further gains in emerging market equities, market bonds and currencies as the liquidity generated in the US will continue to flow into the financial assets of the emerging world. The US Federal Reserve announced on November 3rd that it would pump an additional US$600 billion into the ailing US economy over the next eight months in an attempt to accelerate growth and cut unemployment.
â€œWhile this increase in money supply is expected to keep the interest rates very low and stimulate the borrowing and spending activities in the economy, a significant part of this excess cash will be channeled to the emerging market economies as these countries are better positioned than their developed counterparts in terms of economic growth, superior corporate profits growth and more secure long term prospects,â€ said Dugan.
Sounding a cautionary note, Dugan further said: â€œThe growth potential in the emerging economies could be impacted if some of these countries introduce more substantial capital controls, in order to slow the pace of appreciation in their currencies. However, at this stage, we believe any controls they introduce will be modest.â€