UAE benefits from influx of capital from emerging markets

The UAE has emerged as the key beneficiary among the Gulf Cooperation Council nations of the increased inflow of private capital mostly from India, China and Russia, owing to the political stability and ideal local investment opportunity in the country, according to a study.
The fourth annual Invesco Middle East Asset Management Study states that UAE has gained the most of the private capital inflow (43 per cent) in the Gulf Cooperation Council (GCC) region which also includes Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.
The study, which looks at the evolving asset management industry in the GCC, shows that the private capital flow entering the UAE is from emerging markets including 15 per cent from India, 10 per cent from Russia and 7 per cent from China.

The study reveals that capital inflow from emerging markets, most notably from India, Russia and China has overtaking those from developed markets.
Merely 13 percent of private capital is flowing in from developed markets including UK, Continental Europe and North America while over a third (35 per cent) of capital into the UAE came from the wider 'Middle East and North Africa' (MENA) region and nine per cent from the other GCC countries.
This inflow trend is supported by national statistics that highlight a 9 per cent net increase in bank deposits during 2012 and a 17 per cent annualised growth rate in UAE property prices over the same period, both indicators of increasing capital flow.

According to a third of participants, the key factor bringing private capital into the UAE is its relative political stability compared to the Mena region.

"This is a consequence of continued regional instability - not just in Syria but in Egypt and other parts of North Africa," according to the study.
The second important factor for 29 per cent of participants is the local investment opportunity. "This is the overriding reason for Indian, Russian and Chinese markets investing in the region - an example of 'South-South' trade in action".
"Our 2013 study provides a strong indication of a structural shift in the UAE's fortunes. It seems to be showing signs of developing a leading position as a regional hub between Europe and Asia," said Nick Tolchard, Head of Invesco Middle East.

While capital is flowing into the UAE, overall capital in remaining GCC markets including Bahrain, Oman, Kuwait and Qatar appears to be exiting home markets, making the UAE the key focus for capital flowing into the region, he added.