(Left to Right) Satyajit Singh, Head of Fixed Income Strategy at Emirates NBD, Maurice Gravier, Chief Investment Officer, Emirates NBD, Anita Gupta, Head of Equity Strategy at Emirates NBD Image Credit: Supplied

Dubai: As the US key stock market benchmark S&P 500 reaches record highs in early 2024, the focus shifts to potential foreign investments in the UAE and GCC markets, according to a key UAE investment banker.

The S&P 500’s surge, driven by robust economic data and expectations of a Federal Reserve shift towards interest rate cuts, marks its first all-time high in over two years.

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This prompts the question: will UAE and GCC investors redirect their focus to local and regional markets this year? Maurice Gravier, Chief Investment Officer at Emirates NBD Group, suggests a different trajectory. He believes the next phase involves foreign investors entering the UAE and GCC markets rather than a shift of GCC investors from the US.

“I’m not sure that you will see flows out of the US into the GCC (markets) from GCC investors because I think they are already invested here, and they know the virtues of this market. I think the next step for our market is more to see foreign investors investing in the GCC,” said Gravier.

Gravier spoke to Gulf News on the sidelines of the Emirates NBD Group’s Global Investment Outlook 2024 unveiling. The annual Emirates NBD CIO Outlook is an advisory blueprint covering investment opportunities, key global economic indicators, and in-depth financial market insights.

The report titled the ‘Year of Answers’ presented its annual investment strategy against a positive backdrop of considerable gains after focusing on long-term strategic asset allocation to enhance portfolios in 2023.

How can GCC investors diversify?

“Many GCC investors have already invested in local stocks, and it’s not bad for them to diversify. And it’s usually diversification within the GCC, the US and a bit of China. But, I would like to see them looking at other markets like Europe,” said Gravier, commenting on the outlook for UAE and GCC investors for 2024.

Gravier said that European markets are currently underweight, but there are some ‘beautiful’ companies in healthcare and luxury. “Europe is under-invested by GCC investors,” he explained. Another potential market is Japan. “Japan is only 5 per cent of the indices, but it used to be 40 per cent bigger than the US and is the world’s third-largest economy,” he said.

“I would love to see our GCC investors diversify their US holdings into Europe and Japan. Europe has a huge selectivity. It’s got everything… especially in luxury and healthcare,” stated Gravier.

IPOs should help

According to the bank’s annual investment outlook report’s equity strategy, Initial Public Offerings (IPOs) through disinvestment and private companies coming to market should continue to add to Index gains. “The economy is buoyant based on increasing population and economic reforms encouraging industry and many international firms to expand into the UAE. UAE companies, especially the banks, continue to pay high resilient dividends,” stated the report.

Moreover, regarding the GCC, oil prices should hold steady, while non-oil revenue will boost the economy.

What about regional instability?

Commenting on regional geopolitics causing instability, Gravier said, “The big questions of 2023 are still here, but 2024 will provide answers. Growth, inflation, central banks, geopolitics, elections, and policies will take a direction. These will be catalysts for the year and clues for the future.”

He said Central banks, who dominated markets for 15 years, should become less radical, more predictable and less prominent. “With pivotal changes also materialising in the international order and technology, the investment landscape is rejuvenated,” he stated,

Commenting on whether the UAE’s real estate market would get affected by regional geopolitical tension, Gravier is confident that would not be the case.

“The long-term outlook is brilliant because UAE is next to Switzerland. No question even having geopolitical tensions around is not an issue for the UAE real estate,” he said. Gravier added that Switzerland did not suffer even when its neighbours were at war for 700 years.

He said Switzerland is one of the world’s most expensive residential real estate markets. However, compared to other major capitals and financial centres, the UAE property market is still affordable.

Should investors increase exposure to big tech and AI?
Last year, the focus was on AI enablers, such as Nvidia, who produced chips that facilitate AI. “They tend to be quite costly, experiencing a 200 per cent gain last year or a 33 per cent gain this year. I’m not suggesting that it’s a bubble, but typically, fundamentals don’t progress that rapidly,” he explained. The subsequent stage should entail ‘adopters’, referring to companies for whom AI adds value to their business.

“This progression makes sense, reminiscent of the internet bubble. I’m not stating that it’s an AI bubble, but back in 2000, the focus was on the web. It makes me smile, recalling names like Yahoo, which was at the forefront of people directly engaged with the internet. Eventually, the benefits extended to those actively using it,” he stated.

Gravier said that now is the era for adopters of AI. “The value is present, especially for entities like banks incorporating AI to enhance efficiency. The key point is that one doesn’t necessarily need exposure to companies like Nvidia to reap the benefits. Local investors, for instance, can gain from the efficiency improvements brought about by AI adoption in their respective sectors,” he explained.