As the pandemic continues to hit the global financial systems, investors are on the lookout for safe havens that can help limit their losses. Liquidity problems and the financial and economic distress resulting from the pandemic has had a huge impact on investments. The shift from risky investments to safe haven investments can be crucial in these unprecedented times.
With COVID-19 putting fear in investors, it is expected that 45% of the forgein direct investment (FDI) will decline in the Arab region, says the Organisation for Economic Co-operation and Development (OECD). The pandemic did not leave any sector unscathed, and the real estate sector is no exception. In the first 6 months, global investments dropped by 30% compared to 2019, with a 13% decline in investments in MENA alone according to reports from property advisory & investment firm, Jones Lang LaSalle. Jones even added that real estate investments in the UAE might even decline further. However, even with the spread of the virus slowing down the growth of the real estate sector in cities including Dubai, Richard Waind, group managing director of Better Homes, predicts that after the ramifications of the pandemic come to halt, the sector will recover with investors wanting to take advantage of low interest rates.
Moreover, the rapid changes taking over the world is causing investors to shift their focus on safer investments. For instance, in the quest to avoid this health crisis from becoming a food crisis, investments in agriculture are being encouraged in Algeria to maintain food security. At the early stages of the pandemic, the Food and Agriculture Organization (FAO) collaborated with the World Bank to help countries cope with the crisis by informing them about investment opportunities. Furthermore, in an attempt to secure food and establish safe delivery of resources during the pandemic, more people began turning to e-commerce and investing in technology. As the world continues to move toward digitalisation, investments in technology have also significantly increased across the globe. According to KPMG, one of the biggest boosts in tech investments in history took place during the start of the pandemic, in which companies paid about an extra $15M a week to ensure safe and secure remote working. As a result of Covid-19, investments in security and privacy became the go-to investments. KPMG also reports that investments in tech will also continue to increase in the next year.
Investing in gold has also proved to be a global safe-haven during times of financial distress. As the fear of losing money spreads among investors, many turn to putting their money in gold. This led gold prices to soar as high as $2,000 (£1,527) an ounce according to BCC. However, with surges in gold prices comes the downfall of the dollar. Global head of trading at Heraeus, Hans Ritter even says: “...to some degree, gold replaces the USD”.
There is no denying that the level of financial devastation introduced by Covid-19 might take years to recover from, however, investments in agriculture, technology, and gold have proved to be smart and safe investments. It is worth keeping in mind that there is really no one way to go about safe-haven investments as they continue to change depending on the crisis and its effects.
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