Global trade uncertainty will dominate the political agenda next year, with the US-China trade row, Brexit, the impact of sanctions on Iran, and leadership changes within the European Union the key issues for debate, according to a new report published on Tuesday.
“Overall, we are still in the midst of a transition to a more multi-polar world order, one in which the US, China, Russia, and to a lesser extent the EU and Japan are the most powerful actors, but in which emerging powers such as India, Iran, Saudi Arabia, Turkey and Brazil are increasingly important players” said Fitch Solutions in a report.
First, US-China relations are likely to remain tense in 2019, even after President Donald Trump and his Chinese counterpart Xi Jinping reached a 90-day truce over trade tensions at the G20 summit last weekend. Once the 90 days expire, the Trump administration could still escalate trade tariffs next year, bringing the risk of further Chinese retaliation and US counter moves, the report noted.
Areas of unresolved trade tension between the two superpowers include alleged intellectual property theft by China, lack of market access for the US in China and Chinese state control of commerce and industry, according to Fitch.
“We expect China will be very reluctant to rein in any core components of its long-term development plans around its Made in China 2025 [economic development] programme, and thus a compromise leading to a long-term truce will likely remain elusive,” the report said.
Meanwhile, the UK remains on course to leave the EU in March and its future relationship with Brussels is unclear. The UK government will likely be forced into a climb-down that results in a “soft Brexit in name only”, where the country remains closely tied to the EU by way of some form of customs arrangement, with single market freedoms retained.
“In any eventuality, the UK political landscape will remain deeply divided,” the report said. “The divisions between those supportive of and opposed to Brexit is unlikely to dissipate over the coming years. This will lead to an increasingly fractious policy environment, as the two major political parties struggle to maintain a sense of internal unity.”
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The EU parliamentary elections in May 2019 will reveal levels of support for anti-EU parties, it added. The EU will need to decide how best to protect its interests against President Trump’s trade protectionist impulses, Russia’s rising assertiveness in Eastern Europe, and the escalating budget dispute with Italy.
In addition to these destabilising global factors, Iran faces a challenging 2019 with deteriorating economic conditions due to the re-imposition of US sanctions in November.
“An anticipated economic recession and rising unemployment are likely to lead to more anti-government protests, although these are unlikely to destabilise the regime,” the report said.
Global commerce must also navigate the risks of doing business with Iran in an era of renewed sanctions.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
At Eternity’s Gate
Director: Julian Schnabel
Starring: Willem Dafoe, Oscar Isaacs, Mads Mikkelsen
Three stars
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
more from Janine di Giovanni
UAE currency: the story behind the money in your pockets
Cinco in numbers
Dh3.7 million
The estimated cost of Victoria Swarovski’s gem-encrusted Michael Cinco wedding gown
46
The number, in kilograms, that Swarovski’s wedding gown weighed.
1,000
The hours it took to create Cinco’s vermillion petal gown, as seen in his atelier [note, is the one he’s playing with in the corner of a room]
50
How many looks Cinco has created in a new collection to celebrate Ballet Philippines’ 50th birthday
3,000
The hours needed to create the butterfly gown worn by Aishwarya Rai to the 2018 Cannes Film Festival.
1.1 million
The number of followers that Michael Cinco’s Instagram account has garnered.
The Travel Diaries of Albert Einstein The Far East, Palestine, and Spain, 1922 – 1923
Editor Ze’ev Rosenkranz
Princeton
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
