Mena a bright spot as global smartphone sales slow

The stellar pace of global smartphone sales is slowing, according to data from Gartner.

Emerging markets, including the Middle East and North Africa, are driving the growth of lower-end handsets, but China’s economic slowdown is affecting the top end of the market, according to the information technology consultancy.

Gartner said global smartphone sales in the second quarter grew at its slowest pace since 2013.

It reached 330 million units, up 13.5 per cent year on year and an increase of 28.8 per cent from 2013.

The Middle East and North Africa were among the fastest-growing regions of smartphone sales in the second quarter.

“While demand for lower-cost 3G and 4G smartphones continued to drive growth in emerging markets, overall smartphone sales remained mixed region by region in the second quarter of 2015,” said Anshul Gupta, a research director at Gartner.

“Emerging Asia/Pacific [excluding China], Eastern Europe, the Middle East and Africa were the fastest-growing regions … [but] smartphone sales in China fell for the first time year over year, recording a 4 per cent decline.”

With Apple opening at least two new shops in the UAE this year, its expansion in fast-growing emerging markets could be well timed to offset softer demand elsewhere.

Saad Elkhadem, a research analyst at IDC, said Apple’s move would help the company to build on its success in the UAE and across the GCC.

Apple’s new iPhone will be launched in a matter of weeks – the release date is a closely guarded secret – and Samsung launched two new upgrades to its S6 Note and Edge phones last week to steal a march on its US rival, intensifying competition at the top end of the market.

Samsung’s premium phones continued to be challenged by Apple’s large-screen iPhones in the second quarter, according to Gartner.

The South Korean firm lost 4.3 percentage points in global market share and unit sales fell 5.3 per cent in the period.

However, iPhone sales increased 36 per cent, which helped Apple to gain 2.4 percentage points in market share.

Samsung still leads global sales with 21.9 per cent of the market and Apple is second with 14.6 per cent.

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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.”

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