Citibank expects double digit growth in GCC banks

Citigroup expects to see double digit growth in private banking assets under its management from the Gulf region in 2016 said Anthony Habis, head of Citi Private Bank UAE and Saudi Arabia and Global Family Office MENA. "Last year we had strong double digit growth in assets under management from the region in excess of 20 per cent. We expect to see similar growth this year," said Habis during a conference call with reporters.

Citibank executives said diversification of portfolios will be the priority of regional investors in the context of the challenging economic environment in the region and continuing volatility in the global markets.

"There has been increase in demand for dollar denominated asset classes in the context of volatile currency markets. Clearly, investors from the region are showing their preference for allocation into dividend paying asset classes," said Mark Mills head of Investment Counselling, Middle East and North Africa.

While regional investors are keen on international diversification of portfolios, in the context of continuing volatility, wealth preservation with low risk and income generating asset classes are top on their priorities.

As far as investments into the region is concerned, regional asset classes on the radar of global investors. "On equity side, it is not very easy to access regional stocks. On the fixed income front there is growing interest from investors in quasi sovereign issue which offer relatively higher yields and better security," said Jeffrey Sacks, Director, Capital Markets Strategist EMEA.

The regional markets are expected to remain volatile during the current year in the context of low oil prices. "Oil prices are expected to see some recovery in the second half of the year bringing some relief to the markets, but the recovery is not going to bring back prices to the previous levels. The overall low level of oil prices are going to bring about structural changes which will be good for the markets in the long term," said Sacks.

While the fiscal strains will continue to strain most GCC economies in the next few years, Citi executives said the region is unlikely to abandon their currency pegs to the US dollar. While countries such as Saudi Arabia, the UAE and Qatar haves adequate reserves to defend their currencies for several years to come, Oman and Bahrain are seen fiscally more challenged. But they see extremely low probability of a currency de-pegging in the near future.

In the global markets, Citi expects tactical shift in allocation reducing weightage on equities in favour of fixed income will continue in 2016. Although the bank sees see near-term potential upside in certain equity markets, particularly in the developed world, it expects to continue to reduce our tactical allocation to equities during this year. Despite already-attractive valuations, the bank sees emerging markets (EMs) overall as vulnerable to further downside although certain EM countries and regions where the immediate outlook seems more positive.

While high volatility in core financial assets are expected to persist in the coming year protecting portfolios against it or benefit from it will be the key priority of wealth managers. Amidst ongoing volatility and divergent central bank monetary policies, Citi executives expect financial assets to move in a less correlated fashion than they have over recent years. "We seek to select high-quality investments whose growth prospects depend more on long-term trends and which have been less volatile during periods of market stress," said Sacks.