The year-on-year investment behaviours, from 2011 to 2012, covered western expats, non-resident Indians (NRIs), Arab expats and GCC locals.
In the case of western expats, the NMG researchers used by Invesco identified a trend towards continuing high exposure to life wrappers, increased exposure to structured notes, high allocations to global equities, and increased weightings in global fixed income funds.
The non-resident Indians by contrast decreased their exposure to life wrappers, and increased cash holdings and Indian-based deposits.
Invesco associate director for international distribution Katie Saha highlighted how, with HSBC India offering a rate of 9% and the ICICI NRI an even higher 9.5% earlier this year, it was easy to see the appeal to NRIs of investing in deposits.
Added to this is the easy access to very low borrowing rates to take leveraged advantage of a good differential by investing still more money, though adverse currency movements have had the impact of reducing the effective return to around 4%.
Arab expats, meanwhile, have increased exposure to the local fixed income market, and GCC locals continue to have high direct assets alongside an increased weighting in local fixed income products.
In terms of average target returns, western expats have dropped expectations by 0.3% to 6.7%; NRIs from 11% to 9.6%; arab expats from 8% to 6.7%; and GCC locals down from 11% to 9.3%.
Another key conclusion from the report on ‘Understanding Investor Behaviours in the Middle East’ was firstly, that the GCC is attracting private capital flow from MENA but diversification requirements mean the region is in net outflow relative to international markets.
The report stated: “To reverse this trend and attract international capital to the GCC will, in our view, require a more diverse set of local investment opportunities for international advisers to access.”
It also concluded that an inflexion point in risk appetite had not materialised, mainly due to the ‘Arab spring’ turning to ‘Arab winter’, meaning that investors need educating more to manage their expectations.
