The largest lender in Dubai by assets, Emirates NBD, has disclosed its preferred equity markets for this year as it begins the year with a revised long-term strategic asset allocation. In its most recent report, the bank identified the United States and Japan as its preferred developed countries, and India and the United Arab Emirates as its preferred emerging markets (EMs).
“We like the UAE and India, tactically and strategically. New listings in both regions will aid performance and India domestic demand remains resilient. On China, we are tactically overweight as a part of our EM Asia overweight, though COVID-19 cases continue to rise. In the longer term, we are wary of US tech sanctions and China’s own onerous policies on data and on monopolistic tech and payment companies,” Anita Gupta, Head of Equity Strategy, Emirates NBD CIO Office, noted in a report.
“Our fair value estimates for 2023 predicate low single digit upside for US equities with earnings to stay flat for the S&P 500 and a PE multiple of 18.2X by the end of the year. We expect European equities to perform in line with economic growth, that is small negative returns. We expect more upside i.e., mid-teens, from emerging markets which are at low valuations and relatively high growth,” the report said.
The best way to protect against slower growth and the likelihood of a recession, according to Emirates NBD, is to use income strategies. They advise buying stocks from businesses with stable cash flow, manageable debt, and long-term dividends. Equity markets in 2022 were characterised by volatility, according to zawya news with the first three quarters seeing negative returns as concerns about company margins and profit growth intensified as a result of higher rates, wages, and raw materials.
The supply chain pressures subsided and the world reopened, but inflation rates in developed nations stayed near double digits. “The UAE, Dubai and Abu Dhabi equity indices were the world’s second-best performing region in USD. India and UK were up in local currency but not USD,” the report said.
2022 is the portfolio’s worst year; the worst bonds fell by 17%, and equities indices lost about 20%, according to Emirates NBD. Only cash produced a profit; gold and hedge funds prevented losses. It said that this year is arguably the worst in a century for a portfolio that combines the two main asset classes because both stocks and bonds are significantly negative.
The markets were dominated by one single factor: inflation in the West that resulted in the largest and most coordinated monetary tightening in 40 years. This was in addition to a number of dramatic events, such as the war in Ukraine, the riots in China, the energy crisis in Europe, and a crypto crash.
Essentially, the year 2022 represents the change from a deflationary era, which combined extremely low interest rates with the advantages of globalisation, to an inflationary one: money is no longer free, central banks no longer promote growth, and international relations are significantly fracturing. The year 2023 begins with a sharp decline in the world economy and a real chance of a global recession. The pivot from central banks will be the exclusive focus of market participants, the research claimed.
