Looking Ahead: Forecasts for the UAE Investment Landscape In 2020
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As the CEO of Century Financial, I was glad to see over 200 of the MENA region’s most prolific global and local investors come together for our Global Investment Outlook 2020 seminar in November last year. The seminar allowed financial experts to share their perspectives, views, and knowledge, offering brief trading strategies to the investor community. The purpose of this symposium was to create a platform where not only investment views could be shared freely, but also where investors could network at ease. Here’s a roundup of some notable insights that were shared at this event:
1. Ballooning global debt will see interest rates remaining low
Many economists are worried that the next financial crisis could stem from the burgeoning global debt levels. Global debt is estimated to cross the US$250 trillion mark by the end of this year, which, in turn, will be over 302% of global GDP. Central banks that monitor supply of money are unlikely to be able to increase interest rates with such high debt burdens. This is because a 0.5% increase in interest rates today is likely to garner the same results as a 1.50% increase in policy rates about a decade ago. After about a year of hiking rates in 2018, most central banks were forced to ease monetary policy this year. Low central bank rates set the bar for return on financial assets reasonably low. As an investor, this means that the return on your portfolio is more likely to be in low single digits now, as opposed to the historical average of high single-digit or double-digit return.
2. The aging population requires a change in the way we invest
In 2018, for the first time in history, the number of 65-year-olds in the world surpassed the number of five-year-olds. Today 8% of the global population is over 65, with this figure set to grow to 17% in the next 20 years. Investors are recommended to rethink their portfolios if they are going to profit from the increase in global longevity. They should look at products or services that target older population such as medical innovations, biotechnology, sports channels, entertainment, health food, or any product or service that will benefit the global aging population.
3. Renewable resources are the new oil
Plastic and fertilizers are decreasing in popularity as pollution-related problems become more apparent in the world. Personal vehicles are increasingly going to be electrified, and will not need fossil fuel to run. As a result of this, the world is consuming less oil and petrochemicals than is being produced. By 2030, in UAE, it is estimated that 30% of electricity and energy resources will come from renewable resources such as solar and thermal power. Not surprisingly, oil prices are unlikely to increase materially as global sentiment changes to an eco-friendly bias. Investors should look closely at companies that are focused on developing oil alternatives and technologies such as biofuels, solar power, wind power, and hydrogen. These company may offer higher guarantees of better ROI in future. While the oil and petrol industries are here to stay in the foreseeable future, they are certainly going to experience considerable downturn.
4. Keep an eye on the tech boom
Investors are encouraged to favor the companies that are moving forward and becoming early adopters of these new and emerging technologies. Blockchain, cryptocurrency, initial coin offerings, and the popularity of decentralization is likely to exert increasing pressure on FIAT currencies. With China recently announcing the upcoming roll-out of its state-backed digital currency, any investor that ignores this technology could be missing the boat. On the flip side, uncontrolled exposure to technology is causing multiple health issues in the general population. For example, in the U.S alone, $411billion is spent on treating ailments related to sleep deprivation. This is likely caused by modern pressures, people’s addiction to technology, and the amount of time they spend looking into blue-light screens. Investors could benefit by exploring companies that are successfully manufacturing drugs, techniques, or natural solutions to the negative effects of the tech boom.
5. Globalization is here to stay
Although protectionism/populism has gained traction in recent years, their effect is more on the physical movements of goods than on services. Software services and social platforms are borderless. Movement of capital is increasingly getting complex and difficult to regulate. Digital globalization has changed the way different economies are linked with each other. Performance of different economies in today’s world are more synchronized with each other than during the days of industrialization and manufacturing-led economic growth. Barring a brief period of divergence, developed world and emerging world economies are likely to witness escalation or de-escalation of growth broadly in a synchronized fashion. This means investors wanting to take long/short position on different geographic jurisdiction may have a shorter window of trading opportunity.