Rush to grab UK pound

UAE res­i­dents take ad­van­tage of fall­ing cur­rency af­ter Brexit vote

7 Days in Dubai - - FRONT PAGE - By Ma­hakMan­nan @Ma­hakLFC

UAE res­i­dents have been cash­ing in on the weak pound – with some ex­change of­fices say­ing they have vir­tu­ally run out of ster­ling.

The Bri­tish cur­rency plunged in value af­ter Thurs­day’s shock ‘leave’ re­sult in a ref­er­en­dum on whether to stay in the Euro­pean Union.

The out­come hit con­fi­dence in the UK, with the pound fall­ing to a 30-year low. On Wed­nes­day af­ter­noon, the pound was trad­ing at Dhs5.28, how­ever by Fri­day it had plunged be­low Dhs5. It ral­lied slightly, with the rate back to Dhs5.02 last night.

While it might be gloom for the UK, peo­ple in the UAE see it as an op­por­tu­nity.

7DAYS con­tacted 15 ex­change cen­tres across Abu Dhabi and Dubai - only one had pounds left in stock. The rest said they only had enough to cover ad­vance or­ders.

Wire of­fices also re­ported brisk busi­ness as Brits sent money back home. Among them was Bri­tish ex­pat Alan Daft, 56, who works in avi­a­tion. He ex­changed Dhs52,000 over the week­end.

“We ex­pected the rate to drop if the vote was to opt out, so peo­ple, me in­cluded, have been wait­ing to send money home,” said Daft.

The GCC felt the brunt of Bri­tain’s de­ci­sion to leave the EU with stock prices plung­ing yes­ter­day morn­ing.

Traders rushed to get rid of stock, with real es­tate and banks dom­i­nat­ing the sale in Dubai.

On the Dubai Fi­nan­cial Mar­ket (DFM) Gen­eral In­dex, there were 320 mil­lion shares sold, twice the av­er­age num­ber of the last 20 days.

The Gen­eral In­dex was down by 3.3 per cent in to­tal, the most since Jan­uary, with Emaar Prop­er­ties de­clin­ing by 4.7 per cent.

The in­dex later re­gained ground and closed 3.25 per cent down, at 3,258.17.

One ex­pert told 7DAYS that an ex­change rate of Dhs4.5 to the pound was a pos­si­bil­ity.

“In the weeks lead­ing up to the vote, the chang­ing sen­ti­ment to­wards a leave vote saw the UK eq­uity mar­ket weaken, with GCC in­vestors flee­ing to­wards safe havens like gov­ern­ment debt,” said Bren­dan Dolan, re­gional direc­tor for the Mid­dle East and Africa, Old Mu­tual In­ter­na­tional, part of Old Mu­tual Wealth, a provider of off­shore in­vest­ment so­lu­tions.

“It is al­most in­evitable that this sell-off will con­tinue as we en­ter a pe­riod of ex­treme volatil­ity and un­cer­tainty.

“It is still too early to tell but we could see mar­kets over-re­act in the short­term, fol­lowed by a snap-back as in­vestors di­gest the news.”

He urged in­vestors to re­sist the temp­ta­tion to sell when prices were al­ready de­pressed.

“The only thing we can re­ally say for cer­tain is that we are en­ter­ing a long pe­riod of un­cer­tainty and that in­cludes un­cer­tainty of how it will ef­fect the lo­cal econ­omy,” he said.

“What we do know is that the UK’s EU mem­ber­ship ref­er­en­dum needs to be seen in the con­text of other macro events and risks such as the US pres­i­den­tial elec­tion and the fu­ture tra­jec­tory of US mon­e­tary pol­icy.”

When asked about how much the Brexit will im­pact on con­fi­dence in lo­cal mar­kets, he said: “It is still too early to tell at this stage but it’s cer­tainly the main topic on ev­ery­one’s lips within the Dubai In­ter­na­tional Fi­nan­cial Cen­tre (DIFC).

“How­ever, with the dirham pegged to the dol­lar, GCCbased in­vestors could see their cur­rency strengthen in value with 4.5 dirhams per pound not in­con­ceiv­able.”

A lead­ing fi­nan­cial an­a­lyst from the deVere Group has warned of fur­ther im­pli­ca­tions for the GCC.

“For those with no con­nec­tion to the UK it’s go­ing to be­come a much more at­trac­tive prospect as a hol­i­day des­ti­na­tion as your dirham will go fur­ther than ever be­fore,” said An­drew Prince.

“There are also benefits if you are look­ing at buy­ing prop­erty as it’s go­ing to cost five to eight per cent less than it did a week ago.”

How­ever, if you are from the UK or have a con­nec­tion, then it is a dif­fer­ent story.

“It means you are far less likely to look at spend­ing money to in­vest in the GCC and you are even less likely to come on hol­i­day here,” he said.

In Abu Dhabu, shares opened 4.7 per cent down, but also re­cov­ered to close at 1.85 per cent lower than open­ing.

US Sec­re­tary of State John Kerry urged the UK and the EU to put aside dif­fer­ences and to be re­spon­si­ble about the sep­a­ra­tion for the sake of global mar­ket.

The Brexit vote also re­sulted in nine mem­bers of the UK Shadow Cabi­net re­sign in protest at leader Jeremy Cor­byn’s han­dling of the Re­main cam­paign.

TUR­BU­LENT: The UK’s de­ci­sion on EU mem­ber­ship has re­sulted in shock­waves

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