Emerging markets: UAE’s journey from desert sands to investment oasis

The United Arab Emirates was hit badly by Covid, reporting more cases compared to its neighbouring Arabian gulf states.

That caused a drop in tourism, subdued real estate and higher unemployment.

But it’s since made a powerful recovery and undergone structural reforms that make it more attractive to emerging markets investors.

“The significance of the structural reforms has been underestimated,” argues James Syme, a senior PM from Pendal’s EM team.

Foreign nationals can now live and work in the UAE for a decade and buy property there.

Other reforms have developed Abu Dhabi and Dubai into financial centres. In 2022, the region hosted roughly a quarter of all global IPO volume.

“After taking a thorough look at the UAE’s recovering tourism, trade and oil sectors in the context of deep structural reforms, we moved our position to overweight,” says James.

Alan Polley: Balanced funds are looking more attractive as conditions normalise

After the GFC, investors generally had to chase greater risk to achieve targeted returns.

A lack of fiscal support from overly austere governments meant monetary policy had to take up the slack via non-conventional tools such as quantitative easing, says Pendal multi-asset PM Alan Polley.

“The resulting wall of money increased valuations, decreased prospective returns and risked asset bubbles,” says Alan. “But that’s now unwinding.”

Post-pandemic governments have realised monetary policy is out of bullets and fiscal policy needs to fire up again, he says.

“The transition to fiscal policy is good for investment returns, because governments will now do some of the work to bolster aggregate demand.

“There’s decent prospective returns for equities and bonds, and that now makes balanced funds more attractive.”