“With continued economic headwinds worldwide and equity markets anticipated to be bumpy, a flight to physical assets is expected to fight volatility, uncertainty as well as inflationary fears,” the expert says.
Alkhabeer Capital (Alkhabeer), a leading Saudi investment and asset management firm, has released its latest Market Insights report for 2013 identifying key investment themes globally and regionally. According to Alkhabeer, a wealth of opportunities exists for investors this year.
“Salient investment opportunities are to be found in yield generating real estate opportunities, private placements and commodities.”
Alkhabeer expects that prime rental growth for the office segment in 2013 will remain positive, with most major markets –such as the US and the UK- projected to register single-digit rental growth over the year. Also, the US residential market shows strength and could surprise on the upside following continued loose monetary policy from the Fed.
As the wave of private equity investments is reaching the MENA region, and with cheap points of entry across a number of countries in MENA due to the development of the geopolitical situation, Alkhabeer recommends focusing on investments in the GCC area and Egypt – particularly in cash flow rich companies.
In Saudi Arabia, the approval of a historically-high governmental budget as well as two social packages involving spending of approximately $130 billion, SR 480 billion, are expected to stimulate employment opportunities and fuel growth. The UAE has also earmarked 51% of its 2013 budget, which amounts to approximately $12.1 billion (Dh 44.6 billion), for social spending and 22% for education. In turn, Qatar has pledged $8.1 billion for social benefits packages covering salary hikes, pension rises and workforce benefits.
Alkhabeer recommends being prudent towards equity markets that are expected to experience serious volatility. Only long term exposure to large cash rich, high dividend yield stocks in the US and select companies with high quality management in emerging markets are recommended, while staying away from European equity markets.
Ongoing accommodating monetary policy across the globe will continue to drive investor preference for safe haven investments. Alkhabeer expects a 15-18% return on gold in 2013 as central bank policymakers look at innovative ways for even looser monetary policies. In addition, Alkhabeer believes that regular buying by central banks should more than offset the impact of falling consumer demand.
Supply constraints in Syria, Yemen and Libya are expected to keep the oil markets tight in the near term, thereby driving Saudi Arabia’s growth further. Alkhabeer expects oil price averages close to $100 to $110 per barrel in the medium term.
While US treasuries have continued to show signs of strength as investors seek safe haven investments, continued uncertainty about persisting high levels of debt are likely to limit any further upside at this time. Peripheral Eurozone fixed income markets offer attractive potentials although not without significant risk. Exposure to fixed income instruments, if any, should be in high-yielding corporate bonds which offer a superior alternative to sovereign exposure in terms of risk-return profile.
Although the US faces challenges that require long term strategic action, the Eurozone seems to be faring far worse in the face of severe economic and political headwinds. The US appears to be in a relatively favorable position and therefore Alkhabeer is positive on the USD versus the EUR. Alkhabeer also recommends taking long positions in currencies whose economies have shown considerable resilience in the face of ongoing uncertainty, most notably Canada and the UK.
According to Alkhabeer, the global economy is on a slow path to recovery despite risks that might arise due to headwinds from the Euro zone, US fiscal challenges, US debt ceiling issues and political tensions. The US economy is expected to recover much faster than the Eurozone in 2013 which is being pulled down by lack of decisive leadership in the Eurozone and ongoing austerity measures.
“Our global investment outlook for 2013 highlights the potential for attractive investment plays across a range of asset classes. While the GCC markets show some promise, investors should not shy away from strategic and calculated investments in mature global economies such as the US and the UK, peripheral Eurozone countries and select emerging markets. 2013 looks set to bring to fruition long anticipated increases in gold prices, while equities will yield returns with balanced risk. Now, more than ever, portfolio diversification serves as a key,” Henri Chaoul, Chief Investment Strategist at Alkhabeer Capital said.