Citibank ex­pects dou­ble digit growth in GCC banks

The Pak Banker - - FRONT PAGE -

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.

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