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Welcome to the 10th edition of the FAB Global Investment Outlook (GIO). We are pleased to unveil this year’s GIO publication, which stands out as our most comprehensive to date. It delves into the most significant macroeconomic and financial topics, providing readers with a distinctive overview of market trends in 2024. We hope that these analyses will contribute and be relevant in your investment decision making process. Wishing you a prosperous and fulfilling year ahead.
Investors will need to remain cautious given the rise and heightened levels of interest rates which will continue to impact economies and geopolitical risks which could increase volatility. Global economic growth is expected to slow down in 2024. However, our regional markets look resilient, with economic growth expected to pick up, driven by successful economic diversification and reforms. In the ESG investing space, MENA markets provide some interesting opportunities along with diversification benefits for global portfolios. This year’s Global Investment Outlook theme – ‘Interest Rate Peaks and ESG Integration: Shaping the Future of Global Asset Allocation’ – identifies these investment opportunities and addresses key issues that will drive return for investors. FAB clients can benefit from the input and the research of the entire team of economists and investment professionals whose views have been brought together here.
Michel Longhini, Group Head of Global Private Banking
Although there is some uncertainty on the timing of the rate cut, previous rate cycles clearly suggest that, both equity and fixed income markets do quite well in this environment, and fixed income offers relatively better risk adjusted returns than equities over the next 24 months.
Last year marked central banks’ arrival at the pinnacle of the latest rate tightening cycle – a cycle that has seen mainstream U.S. and European interest rates tightened by 500 bps on average over the past 2 years – this year should be the year of plateauing rates.
The year ahead will no doubt be another challenging one, and in this piece we have highlighted the five key risks - artificial intelligence, US elections, tensions in the Middle East & Africa, climate change, and US – China relations that the world will face in 2024.
Further efforts are needed to strengthen ESG investment practices so that they are consistent and comparable at the global level. It requires the involvement of policymakers, the financial industry, end-investors, and other stakeholders, to develop good ESG practices. There is a room for raising awareness and discussing challenges and solutions related to ESG investing, including the need for guidance on improving consistency and transparency.
Among many ground-breaking initiatives and COP’s firsts, such as a pledge to triple renewable energy capacity, a decision on the lost and damage fund to assist the Global South, the inclusion of actors traditionally left out of the conversation, a sustainable finance push, the first-ever health day and a trade day, were particularly relevant milestones at COP28 UAE.
Green bonds are a strategic asset class to the integrity and advancement of FAB’s sustainability policy. FAB is committed to its green and sustainability-linked funding activities. Since its initial USD 587 million five-year green bond issuance in 2017, FAB has issued over USD 3.8 billion equivalent in green formats in both public and private transactions.
The growth momentum in the GCC should continue to improve on the back of robust economic growth in the non-oil sector. Growth will be primarily driven by the domestic multi-year investment cycle, particularly in Saudi Arabia, supported by various reforms being implemented in GCC countries. In 2024, we can expect a double-digit total return of around 10% to 12% range, including dividends.
The case for regional credits looks compelling as we move into 2024, more specifically the investment grade space with the market moves in November 2023 as investors locally and abroad had raised their overweight, we believe it is set to continue in the coming months.
In this era of financial globalization across the financial services industry, the UAE is now truly recognized as a major financial center on the world stage. Its success is evidenced by the growth and maturity of the local capital markets over recent years, as global investors have come to recognize the returns and stability that UAE bonds offer.
The Gulf Corporation Council (GCC) market is evolving very fast, despite its fledging history as compared to well established global markets, sweeping reforms combined with resolute implementation has led to GCC markets now aligning themselves with their more established peers. In this article, we have analyzed the key changes that are shaping both the GCC equity and fixed income markets.
In US, earnings growth is expected to be positive across the sectors in 2024. The technology sector remains the main driver of growth, and it also acts as an enabler for growth in other sectors. In 2024, we expect double digit return from the US market. However, the key macro risks to be closely monitored includes slower than expected economic growth, stickier inflation, delayed negative impact from high interest rates exceeding expectation, the upcoming US election, and the strained US – China trade relations.
Despite the year-end rally, yields are still hovering at multi-year highs, hence our title “there’s finally income in fixed income”. Bonds offer great value, so we’re applying a simple strategy of being in the market and earning a high carry whilst waiting for price gains, and which should come through at some point during the year. For those willing to take a one-year time horizon, this year could finally be “the year of the bond”.
Recent changes to the industry landscape may permanently shape its trajectory. Some sectors are poised to exhibit drastically altered fundamentals according to many commentators and industry leaders must continue to navigate these shifting trends. What is evident now is that not all markets / submarkets behave in the same way, despite experiencing similar downward pressures, such as rising interest rates.
The article looks at the positives and negative aspects of online stock trading for retail investors. On the positive side, online stock trading brings the depth of choice between available platforms, the access to niche markets or products, the fast, ease and convenience of trade execution. On the other hand, it exposes investors to various risks including risk of significant capital destruction due to lack of expertise and knowledge.
To address growing investor interest in ESG investing, FAB Private Banking offers a range of ESG investment solutions to its clients, and to help them accomplish their financial goals while transitioning towards a low carbon economy.
The standard settlement cycle for most securities transactions is T+2. The Securities and Exchange Commission of the US has passed a new rule to shorten the settlement cycle to T+1 from May 2024. The potential benefits of T+1 settlement outweigh the potential challenges. The move towards shorter settlement cycles, is a way to reduce counterparty risk and enhance market efficiency.
