Why UAE, India are ideal for investment

In the second half of 2018, the UAE stock market is expected to rally by two to five per cent.

The Indian and UAE markets have broadened investment opportunities for the Asian community living here. The markets have shown significant growth, with the Indian economy expected to grow by 7.5 per cent in 2018. The UAE economy is also expected to grow at an accelerated 3.9 per cent rate in 2018.

According to Focus Economics, economic activities in the UAE have become robust in Q2. This is due to solid activity in the non-oil sector and pro-business reforms. The UAE purchasing managers index (PMI) rose to its highest this year due to business-friendly reforms and new investment laws. This will propel the UAE gross domestic product (GDP) to a three per cent high, improving the stock market's prospects. In fact, in the second half of 2018, the UAE stock market is expected to rally by two to five per cent.

Dubai is also famous for its gold market and the current low prices make it a great medium-term investment. Gold, according to data analysed over 20 years, has an 80 per cent probability of delivering 9.4 per cent returns between the months of August and February.

A surge in Eibor rates and a decline in provisions are expected to boost the net interest margins of banks. This will result in higher profits for banks due to improved economic conditions and better asset quality. Abu Dhabi-based banks are therefore the best for any investor who wishes to take earning-based trades. This is because these banks performed exceptionally in 2018 and this success is expected to continue in 2019.

India is also a fast-growing economy, according to the Central Statistics Organisation. In the next 15 years, it is expected to be among the top three economic powers in the world. A recently released IMF Economic Outlook report puts India at a 7.4 per cent expected growth rate in 2018 and 7.8 per cent in 2019. According to the report, this lift in India's economy is due to "strong private consumption as well as fading transitory effects of the currency exchange initiative and implementation of the national goods and services tax."

Growth set to rise
The report also notes that "over the medium term, growth is expected to gradually rise with continued implementation of structural reforms that raise productivity and incentivise private investment."

The Indian market is also ideal for investment since the GST cuts and a strong quarterly earning enable the equity markets to edge higher. An investor should tap into this market through consumer-related stocks such as the Bajaj Finserve, Baja Finance and automobile sector. The seven-year bond yield is also at an 8.01 per cent rate, making it another great investment opportunity.

The cordial ties between the two countries have seen India emerge as a leading giant that provides investment opportunities in the areas of construction, energy, infrastructure and many others. The UAE has also emerged as a great gateway to investments and global trade.

The writer is CEO of Century Financial Brokers. Views expressed are his own and do not reflect the newspaper's policy.