Sovereign Investors In Middle East Seek Emerging Markets Like India As Geopolitical Tension Rises (image@Pixabay)
Following the paths of global investors, the Middle Eastern sovereign investors are also prioritising India and other emerging markets, over the concerns of mounting geopolitical tensions.
Invesco, a US-based investment management firm, in its latest report said that 88 percent of global wealth funds, including 100 percent of those in the Middle East region, consider the south Asian country the most attractive destination for investments among emerging economies.
Saudi Arabia’s Public Investment Fund has already voiced its interest in the emerging nations like India. In 2023, Riyadh’s Investment Minister Khalid Al-Falih voiced the possibility of establishing a sovereign wealth fund office in the Asian country, as well as investing in Indian start-ups that cater to the Saudi markets via venture capital funds.
Josette Rizk, head of the Middle East and Africa at Invesco said, “Amid an unpredictable macro environment, sovereign investors are recalibrating their portfolios, pivoting toward equities, private credit, and hedge funds”, as quoted by Arab News.
She added that the emerging markets are gaining traction, with funds adopting a selective approach.
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As per the report, wealth funds are looking to reshape their portfolios to reflect the new macro environment, with 27 percent and 50 percent in the Middle East planning to increase allocations to infrastructure over the next year.
Invesco’s report is based on the views of over 140 chief investment officers, heads of asset classes, and senior portfolio strategists at 83 sovereign wealth funds and 57 central banks, who together manage $22 trillion in assets.
According to the report, 95 percent of sovereign investors in the region opined about the geopolitical tension as one of the most serious risk to the economic growth over the next 12 months.
It also points at inflation as a significant concern for the investors, with 43 percent of sovereign wealth funds and central banks globally and 68 percent in the Middle East expecting it to settle above apex banks’ targets.
Invesco’s report also noted that more than one-third of sovereign investors globally are using advanced technologies like artificial intelligence in their investment process. Over 93 percent worldwide and 100 percent in Middle East believe that AI will eventually play a role in their organization.
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It is said that half of these investors globally and 80 percent in the Middle East are confident that the implementation of AI can enhance returns.
According to the report, gold is increasingly gaining appeal. Over the past three years, 70 percent of the central banks in the Middle East region have increased allocations for gold. It said central banks are bolstering and diversifying reserves, with 53 percent worldwide planning an increase in the size of their holdings and 52 percent planning additional diversification.
The rising US debt levels have a negative impact on the global role of the dollar. Over 18 percent of central banks, including 20 percent in the Middle East, believe that the position of the US dollar as the world reserve currency will be weaker within five years.
“Amid global uncertainties, central banks in the region are strengthening and diversifying reserves. Gold’s appeal is growing due to concerns about rising US debt levels. Allocations to emerging markets are increasing as central banks seek to enhance returns and mitigate risks,” said Rizk, as reported by Arab News.
In a survey conducted by the World Gold Council, more central banks plan to increase their gold reserves within a year despite the ongoing macroeconomic and political uncertainties and rising gold prices.
(With inputs from Arab News)
