Inflation, cybersecurity and risk of a potential recession are key concerns for UAE investors, with as many as 45% of them holding off on big purchases and 72% concerned about the long-term impact on retirement savings, a report said.

Despite inflation concerns cash holdings saw only a small decrease since May, according to the latest quarterly Investor Sentiment survey from UBS, the world's leading global wealth manager.

When it comes to investing further in the market, 33% of investors in the UAE would increase investments if the markets decline by a further 10%. UAE business owners are concerned about rising material costs, and 44% have raised prices in the past six months, with 48% set to increase in the next half year.

Globally, optimism among high-net-worth investors dipped to early-pandemic levels on continuing concerns about the economic and market impact of inflation and the war in Ukraine, the report said.

With investor optimism waning, nearly three out of four investors are now worried about making bad investment decisions in the current environment and are holding onto cash. Despite this, they see potential investment opportunities if markets decline further, and are highly interested in energy security, smart mobility and automation/robotics as long-term investment themes.

“Investors across the globe are concerned about the combination of higher inflation, the war in Ukraine and the potential for a recession,” said Iqbal Khan, President of UBS Europe, Middle East, and Africa and Co-President of UBS Global Wealth Management.

“In challenging times like this, it’s important that investors continue to seek expert guidance and perspectives to understand the environment and potential opportunities to support their liquidity, longevity and legacy needs.”

“UAE investors remain vigilant as volatility, inflation pressures and geopolitical risks continue to contribute to a sense of uncertainty. We are well-positioned to guide them through this period, and they have shown in interest in investment themes such as energy security, smart mobility, automation and robotics,” said Ali Janoudi, Head of UBS Wealth Management for the Middle East, Turkey and Africa.

“Business owners in the region, while also concerned about rising prices and the cost of materials, are optimistic about the regional economy for the next year and plan to continue hiring.”

In contrast, business owner optimism has rebounded after the largest drop in two years, and most business owners plan to continue to hire workers and invest in their businesses over the next 12 months. Nearly half of business owners expect to raise prices in the next six months, driven by rising materials costs and concerns over wage inflation.  

“Business owners’ increased optimism and steady focus on hiring and investing in their businesses is an encouraging sign given the current market environment, as they are a key driver of the global economy,” said Tom Naratil, President of UBS Americas and Co-President of UBS Global Wealth Management. “Thoughtful wealth management advice and solutions across business planning, portfolio diversification and exit planning will be critical for them as they navigate the market.”

Other regional findings:

US
In the US, short-term investor optimism on the economy and stock market plunged to 39% and 37%, respectively, from 58% in May. If markets decline a further 10%, younger investors are much more likely to increase their investment allocation to the markets (38% among Millennials and younger) than older investors (18% among Boomers and older). Looking ahead to the mid-term elections, the most important issues to US high-net-worth-investors are the economy (85%), followed by healthcare (74%), taxes (72%) and Social Security (71%).  

Latin America
Short-term optimism among Latin American investors has held up better than in the US, with 53% feeling optimistic about the economy and the stock market in their region vs. 60% in the prior period. Their optimism is driven by a sense of a return to normalcy, continuing strong consumer demand, as well as potential opportunities to capitalize on dips in the market cycle.

Europe
Across Europe, optimism about the stock market and the economy among high-net-worth-investors is down 10 and 15 percentage points respectively, from May levels to 50%. Those Europeans who are optimistic cite reasons including the strength in company earnings, employment and consumer demand.

Asia Pacific
In Asia Pacific, optimism is holding steady and remains the highest across all regions with 6 in 10 investors feeling confident in the stock market and their economy. Investors in the region are interested in longer-term investment themes including energy security and smart mobility. – TradeArabia News Service