Dubai: As stock market indices in the US hit all-time highs, and despite global economic growth slowing down, BNP Paribas says it is still bullish on equities for the year.
A top executive from the international banking group said he expects positive returns from most key markets including the US, the Eurozone, and some emerging markets in 2020.
With corporate earnings still in good shape, and political concerns easing as the US and China make progress towards a trade deal, equities should get another boost this year, Masroor Batin, chief executive officer of the wealth management division for the Middle East and Africa at BNP Paribas, said.
He said the bank is advising clients to especially look at stocks that have high dividends, seeing as volatility is expected in equities this year.
We expect more and more clients to get more equity-focused, because finding yield in fixed income is not that easy anymore.
He said he expected certain sectors such as infrastructure to perform well as governments might implement fiscal easing policies.
“We expect more and more clients to get more equity-focused, because finding yield in fixed income is not that easy anymore,” Batin told Gulf News in an interview.
“Valuations in fixed income are high, a lot of the European fixed income is negative-yielding these days, so you would have to seek yield from companies that pay high dividends.”
Bonds
In the summer of 2019, the total value of negative-yielding bonds across the world reached $17 trillion. By the end of the year, that value had shrunk to $11 trillion amid a sell-off in the bond market. Still, concerns linger around the sheer value of negative-yielding debt, and BNP Paribas is advising its clients to rotate out of fixed income and into equity.
For those who are less inclined to buy riskier assets such as equities or those looking to cushion their portfolio against volatility, Batin backed investment-grade fixed income that has solid coupon rates.
“Even though the returns might not be so interesting, it is important to use this (investment-grade fixed income) to balance shocks in your portfolio because with this being a US election year, we do expect that there could be some shocks along the way,” he said.
In the GCC region in particular, where BNP’s wealth management division works with high net worth and ultra-high net worth clients, other asset classes are also in focus. (High net worth individuals, for BNP Paribas, are those with over $5 million in investable assets, while ultra-high net worth individuals are those with over $27 million.)
Europe and the UK
Batin said the bank’s clients in the region are particularly interested in real estate in Europe and in the UK. He expected that trend to carry into 2020, especially as interest rates remain low, making borrowing cheaper.
Gulf investors — be it corporate or individual clients — have long been large buyers of European and British real estate. Locally-founded giants such as Al Habtoor Group and Lulu Group own property in both the UK and Europe, and have not been deterred by factors such as Brexit or low growth in Europe.
BNP Paribas’ Batin said clients in the region are also increasingly investing in private equity for long-term gains.
Private Equity
“I think the low-growth environment that we have seen is one of the factors (behind investments in private equity and real estate) because clients are seeking returns, which are not easy to come by,” he said.
“Asset valuations are at high levels because this is the late stage of the [economic] cycle. Private equity can also be extremely targeted to sectors that you can’t access through public markets.”
BNP Paribas has over $10 billion in assets under management in the Middle East alone. The figure increased by $1.5 billion in 2019 as the bank saw “one of its better years on record.” It expects 2020 to be an even stronger year as it attempts to attract more clients and increase its assets under management.
