The outlook for the Middle East and North Africa (Mena) region for the new decade is a “fascinating” one, full of continued economic reforms, transformation and market liberalisation, according to HSBC.
“With these developments, opportunities are expected to be widespread, across multiple industries and across the region. The combination of supportive monetary policy and responsive central banks are a few of the additional supportive variables for the region,” it said in a release yesterday.
The new decade will not be as kind to investors as the last and this will mean a new path for investments, said HSBC Private Banking in its first quarter’s investment outlook.
“We will most likely see a US recession at some point in the next ten years, and while central banks’ policies should remain accommodative, it is clear that the new decade will mean a new path for investments,” says HSBC Private Banking in its investment outlook for the first quarter of 2020.
“A multi-faceted investment strategy is needed to achieve the three objectives of income, growth and stability,” pointed out Willem Sels, chief market strategist, HSBC Private Banking.
In a low growth and low interest rate environment, returns are unlikely to be as high as they were in the past decade, and in an environment where broad-based market upside is lower than in the past, and political risks remain high, HSBC Private Banking believes diversifying risk exposures will be especially important.
HSBC Private Banking says portfolios should avoid excessive cash balances as well as the lowest rated end of high yield. It favours dollar investment grade, emerging markets’ local and hard currency debt, complemented with dividend stocks, real estate and private debt instruments to generate further income.
It also sees opportunities to boost the return potential of portfolios by focusing on quality companies with sustained earnings growth and, where appropriate, it believes some leverage can help boost the net income of portfolios. It can also make sense selectively to look to hedge funds and private equity to capture growth opportunities and private equity to look through short-term market volatility.
“It’s a new path for investments, but sometimes, new paths lead you to the most interesting sights” Sels noted.
In 2020-21, HSBC Private Banking says investors can expect interesting opportunities for long term growth in sectors, geographies or themes related to the ‘Fourth Industrial Revolution’ or ‘sustainability’.
It is also optimistic that the ageing, urban, digital, mobile, sharing-based, knowledge-based, circular, fast-paced and increasingly Asian global economy provides companies and investors with plenty of opportunities.
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