UAE witnessing increasing foreign capital influx — Invesco study

Developed markets poured leveraged capital into the UAE

The UAE is increasingly becoming a preferred destination for foreign private capital as the country proved a safe haven for investors amid the political turmoil in the Arab world.

The 2013 Invesco Middle East Asset Management study showed that the UAE is currently enjoying a huge influx of wealth from countries around the world, particularly from the emerging markets sector led by India, Russia and China.

The in-depth report noted that the UAE is the “key beneficiary” of private capital flow into the GCC area due to the “relative political stability” in the country compared to other countries in the Middle East and North Africa (Mena). Local investment opportunities are also attracting fortunes from Indian, Russian and Chinese investors.

Nick Tolchard, head of Invesco Middle East, said the UAE has been proactive in building ties and encouraging investment from emerging markets, so the inflows could be indicative of UAE policy rather than emerging markets seizing the opportunity.

Prior to the financial crisis, developed markets poured leveraged capital, such as real estate acquired with mortgages, into the UAE. Lately, however, developed markets have been focusing on the economic situation closer to home.

The rising capital flow into the UAE from international markets is evidenced by the 9 per cent net increase in UAE bank deposits during 2012, as well as by the 17 per cent annualised growth rate in property prices in the country.

Invesco’s report also showed that governments in the Middle East are looking to increase exposure of sovereign wealth funds to private equity, as they seek to diversify and generate more returns.