Investor confidence takes a hit

Renewed fears of a global economic downturn and Europe's growing sovereign-debt crisis have cast a shadow on investor confidence in the UAE.

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Sentiment declined in the third quarter, according to the UAE Investor Attitudes Index - the sixth quarterly survey conducted by the insurance and pensions giant Friends Provident. The index fell to 17 from 18 in this year's second quarter. The sentiment scale ranges from minus 100 to 100. Anything above zero indicates more positivity than negativity.

It was the first time UAE investor confidence had fallen since Friends Provident started conducting the survey last year. But sentiment was still better than in Singapore and Hong Kong, which scored 16 and 15, respectively.

"The fact that the [index] has fallen for the first time since the initial wave of research in June 2010 is understandable, given the turmoil seen across the world's investment markets," said Matthew Waterfield, the general manager for the Middle East and Africa at the insurer.

The dip came as world leaders scrambled to fix cracks in the global financial system and avert a sovereign default by Greece. The most recent economic turmoil has centred on the euro zone, where business and consumer confidence fell in September for the seventh month in a row, according to a European Commission survey.

The lower sentiment readings also coincide with dips in regional and global stock markets. The Dubai Financial Market General Index fell 7.8 per cent during the third quarter. The Abu Dhabi Securities Exchange General Index fell by 6.5 per cent in the period.

Yet despite the negativity, Friends Provident found that investors in the UAE were becoming less risk-averse and increasingly taking long-term views.

Just 11 per cent of those surveyed said they were sitting on the sidelines because of the uncertainty, down from 17 per cent in the first quarter. And 28 per cent said their investment horizons were longer than three years, up from 16 per cent in the second quarter.

"The drop of just one index point reflects a growing maturity among UAE investors, who it is clear . are taking a longer-term approach to investing and do not appear unduly concerned with short-term market fluctuations," said Mr Waterfield.

Investors in the UAE also expressed a strong preference for gold and cash as investments.

About 60 per cent of the investors surveyed said it was a good time to put money in gold, and half said fixed-rate bank deposits were smart investments. Stocks and property were ranked among the least popular investments in the third quarter.

The survey was based on interviews with 769 people in the UAE who are market investors, 93 per cent of whom were expatriates.

afitch@thenational.ae