Dubai: The current volatility in financial markets, which has been fueled by the outcome of the US presidential polls, will last for only a short term, so both expatriates and investors have no reason to make drastic decisions, financial experts said.
“[We] certainly would not advocate investors making drastic [decisions]," a wealth management firm said.
"Investors in the UAE should avoid making any rash decisions at this time," said David Hughes, Gulf regional director at deVere Group.
The attention of the investment and expatriate communities has been firmly fixated on the US election results. Donald Trump’s victory has shocked the markets and sent investors running for cover.
Commodity, particularly gold, prices rallied on heavy buying, while the US dollar fell. As of the latest count, most Asian markets tumbled in the range of 1 to 4 per cent.
Over the last few days, there have been reports that UAE expats are turning to other foreign currencies, as the US dollar was expected to fall if Trump gets the presidency.
According to financial experts, the current volatility in currencies and in financial markets is only a knee-jerk reaction and will not last very long.
Rather than rushing to buy new currencies, expats would do better if they wait out a little bit. What holds far greater significance is the long-term policy actions of the next US president, as well as the upcoming interest rate decision by the US Federal Reserve - which can have more impact on the US dollar.
"Trump is unpredictable but he is also just one man, office holder albeit the most powerful in the world. He still has to get legislations past Congress, and therefore by a hardcore conservative body that is bankrolled by corporations and who want to placate the markets," added Professor Inderjeet Parmar, professor in International Politics of City at the University of London.
“Things will come into perspective over the long term, based on policy actions taken by the incumbent,” added M.R. Raghu, senior vice president for research at Kuwait Financial Centre (Markaz).
“In the short term, stock markets are a voting machine while in the long term, they are weighing machine. Hence, there will be high volatility in the short term. Till volatility subsides, it is better to be waiting on the sidelines and then make changes to portfolios,” Raghu told Gulf News.
From a business point of view, however, Raghu said Trump’s victory could have an impact in the Middle East. “Given Trump’s preference to certain religions, future business deals with the US might have an impact on account of possible changes in foreign policy towards the Middle East,” he said.
Hughes, however, noted that the volatility created by the uncertainty that Trump represents will be exacerbated because the markets had priced in a Clinton victory.
"He is, after, all a candidate with no political experience. The turbulence is likely to be enhanced," Hughes told Gulf News.
"We can also expect the volatility to last longer and be more extreme than with, for example, the shock from Brexit vote, because while that was about UK uncertainty, the Trump win creates uncertainty on a global scale."
As for the remittance sector, Sudhesh Giriyan, COO of Xpress Money, said a new trend will develop most probably after the new US president makes significant policy changes. “We have not seen any major surge in remittances today. If there are any policy changes in the near future owing to the new president, maybe we could see a new trend, but it won’t happen overnight,” Giriyan told Gulf News.
According to Hermes Investment Management, what the public should look out for is the upcoming meeting by the Federal Reserve.
“The market is forecasting a 70 per cent chance of a Fed hike.” “[We] certainly would not advocate investors making drastic changes to a portfolio. [While there is an initial knee-jerk reaction from markets], a result either way is unlikely to have a dramatic impact on the US economy over the longer term.”
Advice for investors
With quality investments now expected to become less expensive, investors can now top up their portfolios and/or take advantage of lower entry points, according to Hughes.
"This all, in turn, means bigger potential returns. A professional fund manager will help investors take advantage of the opportunities that volatility brings and mitigate potential risks as and when they are presented."
"Those who are serious about creating, building and safeguarding their wealth should be reviewing their financial strategies with a professional adviser to see how they can benefit from the landmark events in the US," he added.
"As ever, the best way to benefit from the inevitable key opportunities and sidestep risks is by ensuring proper diversification across asset classes, sectors and geographical regions."
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