Waking up to reality - Emirates NBDFrom the CIO Office. OPPORTUNITIES TO INSPIRE EMIRATES NBD...

Waking up to realityInvestment Outlook 2016

From the CIO Office

OPPORTUNITIES TO INSPIRE

EMIRATES NBD PRIVATE BANKINGABU DHABI – DUBAI – LONDON – RIYADH – SINGAPORE

www.emiratesnbd.com

INTRODUCTION 1

EMIRATES NBD PRIVATE BANKING INVESTMENT OUTLOOK 2016

2016 looks like it will be a very tough year forinvestors. Policy makers are still activelyinvolved in supporting economies six yearsafter the asset markets started theirrecovery, yet global growth continues todisappoint. Our advice is to remaindefensively invested and wait for true valueto appear in the valuation of risk assetmarkets, before committing to any furthersignificant purchases.

The problem for the world is that it is stilladjusting to the reality of weaker global growthand extraordinarily high levels of governmentand corporate debt. We are struck by theongoing struggle for consistent global growthto emerge. The last six months has seenanother phase of disappointing globaleconomic data releases. Already economistsat the World Bank have cut their globalgrowth forecast for 2016 to below 3.0%

Inflation has (worryingly) yet to pick upanywhere close to normal levels. Indeed theworld continues to worry about the deflationthreat. The recent further fall in the oil priceonly adds to the disinflationary pressuresinto the global economy. It is instructive tonote that, despite all the quantitative easingand the Fed trying to instil confidencethrough increasing interest rates, marketinflation expectations have fallen back yetagain in recent months.

2016 will be different to 2015 even if for onlyone reason, that the Federal Reserve isalready on a path of increasing interestrates. Whilst other central banks are stillrunning easy money conditions, higher USinterest rates will undoubtedly detract fromglobal growth. The consequent rise in thedollar coupled with higher rates will addincrementally more risk in the markets.

If there are positives it is that some assetmarkets have already moved rapidly todiscount problems. Amongst bondmarkets, emerging market debt and globalhigh yield have had serious price drops,bringing them closer to a level that willoffer genuine good long-term value toinvestors. Many commodity markets are atmulti year lows. An oil price below $30must bring a correction in the supplydemand equation. It is not if the oil pricewill ever recover, but when.

Gary DuganChief Investment Officer Emirates NBD Private Banking

In a world that lacks growth we still worryabout the performance of global equities.Analysts continue to downgrade corporateprofit forecasts undermining what at timesseems like relatively low valuations. Wecontinue to be attracted to markets wherepolicy makers continue to be heavilyinvolved in supporting their economies. Inboth the eurozone and Japan we expectpolicy makers to come with further waves ofquantitative easing. Japan also benefits fromhaving a corporate sector that is much morefocused on reform and substantially liftingtheir returns on capital.

In the emerging world, India is still a standout.Whilst 2015 was a year of disappointment inrespect of reform the country is still slated toachieve medium term growth of 7% per annum.It is also one of the few countries that has stillthe ability to cut interest rates consistently overtime.We expect China to remain a perennialproblem for the markets, although we don’tbelieve the very negative views that areexpressed by some commentators.

In MENA markets, equities have fallen a longway but remain on valuations that are wellabove previous distress levels. It doesn’tmean that we necessarily see valuationsback to previous floor levels, but that is thekind of value we seek given that the region isfacing tremendous challenges from low oilprices, elevated fiscal deficits and weakgrowth. The good news is that necessaryreform programmes have been accelerated,which can only be good news for the regionover the long term.

The key to this year is the ability forpolicymakers to keep the confidence of themarkets. If investors believe that actions ofgovernments and central bankers willencourage an acceleration of growth,investor returns should be solid. If investorslose confidence in policy makers riskmarkets will be in trouble.

WAKING UP TO REALITY

If there arepositives, it is thatsome assetmarkets havealready movedrapidly to discountproblems.


CONTENTS2

6oIl PRIcESMore importantly, the overall oilmarket balance will be tighter in2016 than it was last year.

12Gcc EcoNoMyHigher domestic interest rates and increasedpublic sector borrowing likely to slow privatesector borrowing.

10BoNDSOur approach on portfolio investing for2016 is purely income generation as wesee limited opportunity for capital gainsin this current macro environment.

8GloBAl EquITIESIn 2016, we encourage investors to

invest with reference to sectors or stockspecifics and less to the countries.

4GloBAl EcoNoMy

We believe the global outlook is notas bad as some make out.


CONTENTS 3

22INDIAA combination of better corporate earningsand expectations of government measuresto boost growth in the next fiscal year’sbudget would typically lead to some goodabsolute returns.

26GolDWe see upside risks tothe gold price in 2016.

18uAE REAl ESTATE2016 outlook for local real estateremains cautiously optimistic, withbuying opportunities coming to marketafter recent weakness. 20

cuRRENcyWith the US economy likely to

remain the positive standout, the dollaris likely to benefit and risk currencies

are expected to remain subduedshould geopolitical unrest increase.

24cHINA

We believe the risks are overblownand expect that international investorswill prefer to take on China exposure

through international stocks that have alarge relationship with China rather than

through domestic equities.

We think that the macroeconomic picture atthe start of 2016 is less negative than thatsuggested by the way markets have startedthe New Year.

Although 2016 has begun with more thanthe usual degree of volatility, there is a littlemore certainty about some of the key issuesfacing the world. This should provide somereassurance that 2016 could actually be ayear of progress despite the volatilityexperienced in the first weeks of January.In particular with the path of US interestrates in 2016 looking more certain, with ‘lift-off’ now behind us, the question becomeshow much the Fed will raise rates instead ofwhether they will at all. And in Europe theimpending sense of crisis and doom thatcharacterised the start of previous years isno longer with us.

However, financial market volatility early inthe New Year does suggest that there is asignificant disconnect between broadlypositive macro developments and thefinancial markets response.

The fact that the era of zero rates is behindit should actually create confidence in theUS economy. Markets are now likely to findan anchor in accommodative monetarypolicy outside of the US and fromrecovering US-led global economic growth.

Divergent monetary policies need not bedestabilising so long as the communicationof policymakers is effective. We are alsoinclined to think of ongoing oil price softnessas carrying the potential to boost demand,rather than seeing deflationary risks in it.

The Fed tightened monetary policy by 25bps in December, increasing the Fed fundstarget range 0.25% – 0.50% and thediscount rate to 1.0%, with the vote beingunanimous. The FOMC said that labourmarket slack had diminished ‘appreciably’and said that it is ‘reasonably confident’inflation will rise to 2% in the medium term.The Fed maintained that future adjustmentswill be ‘gradual’ although notably the dot-plot was little changed, still suggesting fourquarter point hikes this year, while themedian long run funds rate is still seen at3.5%. The minutes of that meeting,however, released in January suggest thatthe decision to tighten was a closer call thanmany at the time realised.

Although US non-farm payroll data wasmuch stronger than expected in December,the absence of earnings growth in thatmonth has arguably reduced the prospectsfor the FOMC following up on the first ratehike quickly this year. However, in reality itwill probably take a few weeks for thesignificance of this data to be properlyunderstood, such is the amount ofuncertainty in other parts of the world. USQ4 economic growth is admittedly looking atrisk of falling back towards 1.0%, but themomentum in the labour market growtharound the turn of the year suggests that Q1growth could be quite strong. For choicetherefore we prefer to stick with our core


MARKET EXPECTATION AND FED’S MEDIAN FORECAST – DEC 2015

Source: Bloomberg

Market Expectations Fed's Median Forecast -Dec 2015

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan-16 Aug-16 Mar-17 Oct-17 May-18 Dec-18

GLOBAL ECONOMY4

NOT THATBAD


assumption to expect four rate hikes overthe course of this year, starting in March andconsistent with the Fed’s dot plot.Furthermore, we suspect that with the USclosing in on full-employment an inflationaryjolt could surprise and be quite sudden,especially once oil prices begin to find abase. The Presidential election in Novembermight also be an argument for front-loadingrate hikes into the early part of the year.

To some extent we feel there is a disconnectbetween macroeconomic developments andfinancial markets which continues to confuseinvestors. A large part of this is to do withChina, whose economy has been slowing forsome time but whose markets are strugglingto come to terms with it, and with authoritiesthat are finding it difficult to manage.

In relation to oil as well, while weaknessshould be a positive for growth overall, the markets are viewing it as deflationary.The repercussions for US financialmarkets are often negative in the firstinstance which has the effect of hurtingbroader sentiment as well. Hence, whilethe data flow paints a relatively convincingstory of US recovery, the market reactionappears unconvinced. Ultimately wesuspect the conundrum will resolve itselfpositively, but it might take a while.

When it comes to the ECB (EuropeanCentral Bank) and the Eurozone, whathappens in the US could prove veryimportant this year. We suspect the ECBwas hoping that in 2016 the Fed and theBank of England (BoE) would do much of the work for it, by raising rates and therebyengineering a weaker euro. However, if this

scenario does not play out quickly then theECB will be under pressure to ease policyfurther probably in March. When it comes tothe BoE it is a different story, with the Brexitreferendum perhaps the most importantevent on the horizon. Latest developmentsincrease the odds of the poll being taken inthe summer. The associated uncertaintiesof this vote could put lots of decisions onhold, with more focus on the UK’s twindeficits, especially the size of its currentaccount deficit.

This comes on top of the fact that the paceof UK activity has slowed in recent quartersraising questions about how quickly the Bankof England will begin normalising interest rates.

As far as the Bank of Japan is concernedwe view the tightening in monetary policy as a result of the strong JPY sinceDecember as undoing a lot of the stimulusthat is already in the system. That being thecase, and with GDP flat, productiondeclining and inflation showing few signs ofmeeting the 2.0% target, we suspect thatpressure will soon be on the BOJ to furtherexpand its balance sheet, possibly as earlyas the end of this month.

US NON-FARM PAYROLLS AND US UNEMPLOYMENT

Source: Bloomberg

Change in non-farm payrolls (000s, LHS)Unemployment rate (%, RHS)

Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-150

100

200

300

400

500

5

6

7

8

GLOBAL ECONOMY 5

When it comes to theEuropean Central Bankand the Eurozone, what

happens in the UScould prove very

important this year.

Divergent monetarypolicies need not be

destabilising so long asthe communication of

policymakers is effective.


6 OIL PRICES

In the near term, commodity markets arelikely to remain under considerablepressure with little prospect of anymeaningful rallies. We do think that there iseventual upside to commodities markets in2016 but that it won't start to make itself feltuntil the second half of the year. Central tothis story is our outlook for oil.

In short, we expect oil to recover from thelevels where it ended 2015 as fundamentalsbegin to act as a supportive factor, ratherthan the drag they have been for the last 18months. We expect Brent futures to end theyear above USD 60/b, bringing the totalyear average to USD 55.25/b. NYMEX WTI,the US benchmark, should follow a similarpattern and average just over USD 50/b forthe year.

Considering how depressed the marketstarted 2016, these forecasts may appearambitious. However, USD 55/b for Brent onaverage in 2016 is only a 3% increase onwhere prices averaged 2015. Markets willbe characterised by strong volatility, whichis actually a return to normal conditions foroil compared with the pattern weexperienced in 2010-14.

Tighter marketshould mean higher pricesThere are several dynamics that we feel willshape the trajectory of prices in 2016. Mostimportantly, the overall oil market balancewill be tighter in 2016 than it was last year.We expect the global surplus to move froman average of over 1.5m b/d in 2015 to0.6m b/d this year, a considerable drop inexcess supplies. There is little consistencyin past performance when assessing theeffect on prices from a 1m b/d tightening ofglobal supplies but keeping in mind themarket's current focus on stockpiles, asustained draw in global stocks should helpto generate a switch to a more positivesentiment in oil.

Oil consumption growth should returnmore to trend like levels of 1.2m b/d(compared with the 1.8m b/d estimated in2015) with the fastest gains coming fromAsia, the Middle East and Africa. There isstill substantial room for expansion inIndian and Chinese oil demand, not tomention some of the smaller Asianemerging markets.

Non-OPEC supply should also show signs ofweakness. US oil output surprised on theupside in 2015 as producers were able tomaintain volumes thanks to profitable hedgesentered prior to the sharp decline in prices. In2016, there are likely to be fewer of thesehedges in place and existing ones will beexpiring, meaning producers will be exposedto a far less accommodative futures curvethan they saw last year. Expenditure cutbackswill impact across the industry as there isprioritisation on the most profitable fields.

By contrast, we expect oil supplies fromOPEC to expand in 2016 as theproducers' bloc captures more of theglobal market. Major producers in ourregion will maintain production at elevatedlevels and have committed to keepingcapital expenditure intact.

Iran should also re-emerge onto global oilmarkets as a major exporter as some pointin 2016. We maintain our outlook for anadditional 500k b/d of oil from Iran onaverage this year, with most of the newsupply likely to come in the second half.Even with these increases from OPEC, westill anticipate a tightening in the overallmarket balance, helping to support prices.

VOLATILITYAHEAD

Most importantly, theoverall oil market

balance will be tighterin 2016 than it was

last year.


7OIL PRICES

only way is up for sentiment inmedium termMarket sentiment toward oil deterioratedthroughout 2015. Net long managed moneypositions for WTI ended the year at theirlowest level since 2008 while shorts movedto record highs. With a market so one-sided, it raises the question of who is thereleft to sell to? Prices for physical oil mayhave limited downside in the near tomedium-term as for many regions arealready producing well below breakevenprices, which should prompt the shut-ins wediscussed above. When this process starts,which we acknowledge still is a big if at thispoint, the market may need to quickly shiftand cover its shorts, sparking a rapid andintense rally. But in light of the currentsurplus conditions, we expect the recovery

to be grinding and gradual, rather than shortand sharp.

There are some risks that could derail ourprojection for oil prices. First, and perhapsmost obvious, is whether China'sslowdown disappoints markets. To start theyear, weak PMI numbers out of China seta somber tone to markets, in turnimpacting oil prices. But as we haveargued several times in the past, looking atactual China oil data presents a far betterpicture. Apparent oil consumption growthin China (measured by net imports andrefinery throughput) averaged 9.9% up tothe end of October, an enormous gain onyear earlier levels. Chinese consumers aredriving more and buying bigger cars, salesof SUVs were up 50.9% year-to-date as ofthe end of November.

A second major risk is if supply surprises onthe upside as it did this year. Oil productionin the US continued to increase until themiddle of 2015 even as prices continued togrind downward. The reaction of shale oilproducers to any rally from current levels isunknown but if they did resume output thenwe would expect a relatively sudden rise inUS oil production given the dynamics ofproducing shale oil. In 2015, several majorproducers beyond the US also raised outputsignificantly, namely Russia and Omanmore locally.

Crude Oil in Bearish Trend

20

30

40

50

60

$/bb

l

70

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Brent Crude, future

Source: Bloomberg


8 GLOBAL EQUITIES

In 2016, we encourageinvestors to investwith reference tosectors or stockspecifics and less tothe countries.

Recent years have shown the folly ofinvesting in equities solely with referenceto countries rather than sectors orindividual companies. In 2015, the gapbetween the best performing sectorconsumer staples and the worstperforming sector- energy was 29percentage points. When you buy aninvestment in a country or regions’ equitymarket, you often buy investments in allsectors irrespective of their fundamentalsor trading prospects. You would hope thatthe portfolio manager of a mutual fundinvested in just one country will switch outof what are likely to be poorly performingsectors. However, managers tend to hugthe benchmark, which means they ofteninvest in sectors even with poorprospects because they don't want theirportfolios to look too different from theunderlying index.

European Banking stocks haveunderperformed in 2015 and are trading ata 30% discount on 12 month forward Priceto Earnings ratio to the broader market.The sector remains one of the cheapest inEurope. European banks should benefitfrom an acceleration in eurozoneeconomic growth and loan growth. Webelieve the Bank’s capital raising seen in2014/15 should come to a conclusion, andmany of the regulatory pressures seempriced into share prices.

We expect the global healthcare sector tosee double-digit returns in the comingyears. The sector benefits from thepositive newsflow of continued innovationthrough the commitment of companies toResearch and development spending,leading to new drug launches. Developedmarket governments are allocating more tohealthcare, and emerging marketconsumers have a higher disposableincome, which is increasing theirwillingness to spend on higher cost drugs.

The healthcare sector has experienceddepressed valuations over the backlashfrom the US Democrat Party’s crusadeagainst higher drug prices and Valeantpharmaceutical’s accounting scandal.Consequently, the sector trades at 16.2X2015E earnings (vs. the five-year peak of

20x in July 2015). Exposure to qualitycompanies with strong drug pipelines willprovide a defensive earnings stream sinceconsumers aspire for quality medical careregardless of the economic cycle.

The global technology sector shouldcontinue to perform though trading onhigh valuations, as the expectedexponential earnings growth, shouldjustify the value premium. With the shift todigital marketing, social media and homeentertainment will benefit and with theshift to online retail (the best performingsector in 2015 +83%), online retailingcompanies are expected to continue theirpositive trajectory.

SECTORSNOTSTOCKMARKETS

ouR PREfERRED SEcToRSEuropean automobiles.The weakness of the euro will improve the competitiveness of Europeancompanies in global markets. A lower oil price should increase demandfor cars as the costs of running a car fall. In any case, the trend forbuying more fuel-efficient cars as well as the nascent electric car marketare all factors that are increasing consumer demand for autos. 2015 hasbeen a record year for the auto industry, and the sector is expected tomaintain healthy sales growth. Auto stocks are trading slightly cheaprelative to long-term norms at 3X multiple of EV/EBITDA.

MSCI World Total Returns 2015

ENERGY

MATERIAL

UTILITY

FINANCE

INDUSTRL

TEL SVC

INFO TECH

CONS DISC

HLTH CARE

CONS STAPLE

-25% -20% -15% -10% -5% 0% 5% 10%

-22.1%-14.8%

-5.7%-2.7%

-1.5%3.7%

5.2%6.0%7.1%

7.2%

Source: Bloomberg


9GLOBAL EQUITIES

Japan a countrystandoutFor those investors still looking for acountry investment Japan probablyremains the standout with some veryspecific country factors. Despite the goodperformance of Japanese equity marketsin 2015, there should be more return instore for investors. Amongst developedmarkets Japan has the highest estimatedcorporate earnings for 2016 andvaluations are below other developedmarkets and the ten-year trend averages(14.2X 2015E Earnings).

Japanese equities have been the bestperforming major developed market since2013. Margin expansion and top linegrowth should drive corporate earnings

growth and stock market returns. Cruciallythe market is seeing a strong improvementin returns on capital. The return on equity(ROE) has improved for the TOPIX from6% in 2012 to 8% in 2015. Corporatereform is showing signs of success withthe challenge lying in converting the cashin balance sheets to capital expenditure.The Bank Of Japan’s purchase of ETF’stracking the JPX-Nikkei 400; (the JPX-Nikkei only invests in companies that havehigh ROEs) reinforced the pressure oncompanies to improve their ROEs.

MScI ToTAl RETuRNS2015 (%)

uS

1.3cHINA

-7.7EuRoPE

8.9INDIA

-1.6JAPAN

10.3Gcc

-13.9DEVEloPED

-0.3EMERGING

-14.8

The weakness of the eurowill improve the

competitiveness ofEuropean companies in

global markets.

Source: Bloomberg


10 BONDS

It is too easy to be dismissive of bondmarkets as offering little value in the faceof a rise in US interest rates. Rises ininterest rates at least in the early stage ofrate tightening are typically something tobe feared by bond markets. However thistime could be different. There is no strongconviction in the market about how highUS interest rates will be increased; indeedwith recent problems in China and generalnervousness in markets that maypercolate into the global economy, there is still a small risk that the Fed may donothing more or indeed be forced to cut rates.

Bond market returns in 2016 will largelybe driven by the success or otherwise ofcentral banks to deliver the inflation thattheir mandates require. To date themarkets have been much more skepticalthan the policy makers about the successof the massive waves of quantitativeeasing to create inflation. The recent fallin oil prices will only make the gapbetween current inflation rates and centralbanks’ targets even harder. The majordifference between this year and any ofthe previous seven years is that theFederal Reserve has already started toraise rates because they are moreconvinced than ever before that USinflation is on the right path to the Fed’starget. The financial markets remainskeptical but it has to be recognised thatthere has never been such a significantrisk that (for a change) the centralbankers could be right.

The good news for investors looking foropportunities in the bond markets, as2015 came to a close some sub sectorsof the global bond markets sold offaggressively. We believe this has createdsome selective opportunities.

European High yield DebtWhile US companies continued to activelyre-leverage their balance sheets, Europeancompanies have carefully managed theirbalance sheets in recent years to the benefitof bond-holders. The profitability of Europeancompanies shows some tangible signs ofconsistent improvement. Given the steadyimprovement in the Euro area GDP growth,we expect European corporate profit marginsto continue to improve. And while Europeanmanagements might eventually takeadvantage of low yields to issue more debtand start actively re-leveraging their balancesheets like their US counterparts, wecontinue to expect such a shift to occur onlygradually. The ECB should provide supportfor the market by maintaining generally veryloose monetary conditions for much of 2016.

Emerging MarketsInvestors will have to be patient investing inthe emerging market bonds in 2016.Valuations are low and offer opportunity buta number of major countries still facesignificant challenges. In Brazil proceedingscontinue to impeach the current President,which combined with ongoing pooreconomic news doesn’t help the market. InChina it seems everyone is waiting for animpending disaster in the bond market.However it should be borne in mind that theauthorities have many tools to support thebond market such as a further easing ofmonetary conditions. Of the major emergingcountries India has probably the bestbackdrop with a possible further easing ofmonetary conditions as the fall in oil pricesfeeds through to low inflation. For moreimmediate investment opportunities we seevalue in Mexico, Chile, India and Indonesia.

The challenges for 2016For the broad bond markets the greatestchallenge is that any rises in US interest rateswill limit the prospect for capital gains. Ourapproach on portfolio investing for 2016 ispurely income generation as we see limited /capped upside on capital gains in this currentmacro environment. We emphasise on creditselection as vital and investors need to workon extra diligent process in filtering issuerswith strong fundamentals, healthy financialratios as well as focus at each issuer ontheir business models for fair judgement ontheir cash flow generation along withcomfortable liquidity conditions.

FINDING VALUEIN BONDMARKETS

uSThere is no strong convictionin the market with regard tohow high US interest rates

will be increased.


11BONDS

Middle Eastern debt marketsConcerns over country fiscal imbalancesand deficits are likely to continue to putdownward pressure on bond and sukukprices. Tighter liquidity conditions stemmingfrom the retrenchment of governmentspending and weaker growth havecontributed to the widening of bondspreads. A further challenge for the marketsis that we expect to see deluge of supply onthe primary market as well as potentiallysome downgrades by the rating agencies,which could weigh on sentiment andincrease the cost of refinancing forcorporates. We do expect to see

governments in the region such as theKingdom of Saudi Arabia, issue debt in theinternational markets to bridge their fundingneeds. GCC Banks are also likely toopportunistically use any strength in themarkets to issue debt to reinforce theirbalance sheets. The good news for

investors looking foropportunities in the

bond markets is that as2015 came to a close

some sub sectors of theglobal bond marketssold off aggressively.

EuropeEuropean companies have

carefully managed their balancesheets in recent years to thebenefit of bond-holders.

chinaAuthorities have many toolsto support the bond marketsuch as a further easing ofmonetary conditions.

Middle EastConcerns over country fiscalimbalances and deficits arelikely to continue to put

downward pressure on bondand sukuk prices.

EmergingMarkets

Investors will have to bepatient investing in emergingmarket bonds in 2016.


12

Despite the nearly 50% decline in oil pricesin 2015, we estimate growth in the GCCremained relatively robust, averaging 3.4%on a nominal GDP weighted basis, asslower non-oil sector growth was offset by asubstantial 4% rise in GCC oil production(excluding Bahrain and Oman).

As OPEC is expected to maintain itsstrategy of protecting market share in theface of lower oil prices, we expect oilproduction to remain around current levelsin Saudi Arabia and rise further in the UAE,Oman, Qatar and Kuwait. This shouldcontinue to underpin GDP growth in theGCC in 2016.

However, non-oil growth is likely to slow thisyear for several reasons. Althoughgovernments in the region are not expectedto cut spending aggressively in 2016, thefiscal policy stance has become much moreprudent across the region. Non-oil incomewill be raised through higher fees and taxes(including new land taxes in Saudi Arabiaand higher corporate income taxes inOman), while households will face higherutilities and energy costs as subsidies arereduced across the GCC.

Low oil prices and increased geopoliticaland economic uncertainty have also had anegative impact on both consumer andbusiness confidence, and this has beenreflected in declining regional stock markets.

GCC ECONOMY

OPEC is expected tomaintain its strategy of

protecting market share inthe face of lower oil prices.

Growth is likely to slow this year, asgovernments are more prudent withfiscal policy.

Banking sector liquidity remainschallenging as government depositsunder pressure and Fed hikes ratesthis year.

Higher domestic interest rates andincreased public sector borrowinglikely to slow private sector borrowing.

SLOWERGROWTH IN 2016


13

With increased uncertainty about the globaleconomic outlook reflected in volatile globalmarkets at the start of this year, householdsand corporates are likely to remain cautiousabout spending and investment decisions inthe near-term at least.

Interbank rates in Saudi Arabia and the UAErose sharply last year, as liquidity in thebanking sector tightened on lowergovernment deposits and increased publicsector borrowing to finance budget deficits.We expect liquidity conditions to remainchallenging this year, as although oil pricesare forecast to recover from current lows, theaverage oil price is expected to be similar to2015 (USD 55/b for Brent).

Furthermore, we expect the Fed to hike atleast another 75bp, and possibly another100bp, this year which will keep GCCinterbank rates on an upward trajectory. In2015, most banks absorbed the higher cost ofdeposits to a large extent, but these are likelyto feed through to increased borrowing costsfor consumers and corporates in 2016.Private sector credit growth may also beconstrained by increased governmentborrowing as authorities seek to partiallyfinance budget deficits from debt issuance.

Nevertheless, we still expect non-oil sectorsin the region to expand in 2016.Manufacturing will be supported by increasedoil production, as was the case in 2015, whilegovernment spending on key infrastructurewill continue, particularly in the UAE andQatar. Even in Saudi Arabia, where the

government announced a -13.8% cut inbudget spending for 2016, the authoritieshave indicated that housing, public transportand infrastructure projects that have alreadyhad funds set aside in previous years willcontinue as planned, in addition to the fundsallocated in the 2016 budget.

In the UAE and Qatar, projects related totransport and tourism infrastructure ahead ofExpo 2020 and the 2022 FIFA World Cup arealso expected to go ahead. Indeed theEmirates NBD Dubai Economy Trackersurveys showed the construction sectoroutperforming travel & tourism and wholesale& retail trade in terms of activity and ordergrowth for most of last year.

Export-oriented sectors, including tourism & travel services, will continue to face theheadwind of a strong USD through 2016, asUS interest rates rise. Surveys indicated thatmargins were under pressure last year asfirms cut prices to remain competitive, andthis is likely to remain the case in the comingmonths. On a more positive note however,the inflation outlook remains benign, withimport costs contained and transport costseasing as fuel prices are liberalised. Lowerhousing costs are also starting to feedthrough to the official inflation index in theUAE, and we expect inflation to average 3.5%this year from an estimated 4.0% in 2015.

GCC ECONOMY

GCC REAL GDP (%YoY)*

* Nominal GDP-weighted average. Source: Bloomberg

2012 2013 2014 2015E 2016F0

1

2

3

4

5

6

76.0

3.2 3.4 3.4 3.2


14

Sovereign bonds is the largest segment inthe GCC bond universe, accounting for onethird of the total outstanding amount. Inaddition, the GCC market includes asignificant number of government relatedissuers that have their credit quality directlylinked to the government’s rating.

Going into 2016, we are optimistic about theperformance of sovereign bonds albeit notwithout material downside risk in theimmediate quarter or two. Our confidence inthe medium term performance stems fromincreasing budgetary discipline and pace ofreforms in the region. In the interim,performance of the GCC sovereign bondswill equally be affected by fundamental(rating downgrades) and technical (increasingsupply, falling local demand) factors.

High budget deficitsto drive substantialnew supplyAs per the latest budget announcements,total budget deficit of GCC sovereigns islikely to be around USD140bn in 2016,highest on record in absolute numbers. Thismay increase further if oil prices linger aroundUSD 30/b for longer. In addition the budgetdeficit could also be higher if actual expenditureexceeds the planned budget as has generallybeen the case with Saudi Arabia recently.

Beyond 2016, budget deficits may reducevia introduction of taxes and cutting down ofexpenditures, including subsidies. As of now,budget deficits are likely to be funded byliquidating foreign reserves, privatisation ofgovernment assets and by raising newgovernment debt.

GCC government’s public debt is projectedto increase by circa USD112bn in the currentyear. We expect at least half of this to befunded by bonds as governments wouldendeavour to reduce the strain on liquidity inthe local banking system.

Assuming a 60:40 split between hardcurrency and local currency, we expect newUSD denominated bond supply of circaUSD35bn this year. However, there is somedownside risk to our projection from thepossibility of the governments tappingdeeper into the overseas syndicated loanmarket or using private placements withinternational investors instead of fronting thecapital markets’ volatility. For example, Qataris currently in the process of signing aUSD5.5bn syndicated loan deal, possiblywith several Japanese banks.

Tighter liquidity in theGcc banking systemLiquidity in the GCC banking systems hasreduced as oil revenue related depositsdecline and borrowings from thegovernments and related entities increase.Loan-to-deposit ratios have crept up higher

in all GCC countries. In KSA it is close to88% (vs guidance of 85%) while in UAE it isclose to 103% vs the central bank guidanceof 100%. This has reduced availability ofaccess liquidity to deploy in public bondinvestments. The reduction in local demandfor the GCC bonds is likely to add to thepressure on bond prices.

Declining Gccsovereigns creditquality albeit still highby the global standardsGCC sovereign creditworthiness hasdeclined since the onset of oil price rout andsovereign ratings have been downgraded toan average of ‘A+’ That said this should beseen in light of the fact that only circa 53% ofglobal sovereign ratings are in investmentgrade and ‘B’ category rated sovereigns

THE FALL BEFORE THE RISE

QATARHas clearly stated its intention tofund the budget deficit, almost

entirely via new debt.

SAUDI ARABIAWith its staggering circa USD 98bn equivalent ofbudget deficit will be the biggest issuer of bonds

this year, despite using its foreign reserves to fundpart of the deficit.

OMANAnnounced plans to raise up to OMR 900million in the international debt market andup to OMR 300 million in the local market.

GCC SOVEREIGN BONDS


15

have generally made up the single-largestcohort in the global sovereign bond market.

Four out of the six GCC countries stillremaining in the ‘Aa’ category, should retaininternational investors interest.

Gcc credit spreadsgetting cheap onrelative valueGCC sovereign bonds have begun to lookcheap on relative value after an average68bps widening in credit spreads over thelast year. BBB- rated Bahrain bonds arecheaper than even BB+ rated Brazilian orRussian bonds of the same tenure. CDSspreads on GCC sovereigns have increasedover 300% in the last one year when, in-fact,the actual debt at the sovereign levelremains minimal.

UAEUAE has no material need to raise debt for fundingdeficits, however the government plans to tap the

market to support economic growth and fundinfrastructure assets in preparation for the Expo2020. Emirate of Sharjah is already in the market

this month with a benchmark sized dollardenominated offering. Abu Dhabi and Dubai will

likely visit investors during the year.

BAHRAINAlready raised USD1.5bn in November lastyear and could likely approach the marketagain this year.

GCC SOVEREIGN BONDS

We expect GCC sovereignspreads to widen furtherpredicated on the basisof high new supply,continued rout in the oilprices, increasing budgetdeficits, rising USD rates,falling liquidity in theGCC banking sectorand the generallyprevalent risk aversion.We expect total returnsfor the full year to remainpositive.

Our confidence inspread tightening in thesecond half of the yearis based on anexpectation of oil pricesmoving towards USD50,increasing pace offiscal reforms, inflow ofcheap capital fromEurozone and Japanand finally the relativevalue of the GCC bondsin view of their highcredit ratings.

coNcluSIoN

Budget deficit couldbe higher if actualexpenditure exceedsthe planned budget ashas generally beenthe case with SaudiArabia recently.


16 GCC EQUITIES

MACRO HEADWINDS STALLINGGCC MARKETS, WHEN WILL FAIRWINDS BLOW?

The bull caseThe Bank’s commodity analyst envisages thatsome order will be brought to the oil marketas we approach the end of the year leading tosome strength of the oil price. Certainly if oilhit the $60 level the market would beencouraged and equities would rise materiallyhigher. However whilst all the focus is on theoil price, to us the structural changesunderway in response to the challenges of alow oil may be an even more positive factorfor the major GCC economies and markets inthe medium term.

Structural change brings potentially twopositive factors to bear on the markets aneconomic one, and a financial marketschange. The lowering of subsidies and amore determined effort to encourage the non-oil private sector are changes that shouldaccelerate the reform of GCC economies.$100 oil had led to too many countries notpushing hard enough to make the shift awayfrom the dependence on oil, $30 oil hasfocused the minds in a positive way. Thedevelopment of the non-oil private sectoropens the door to much greater depth to thefinancial markets. Less public ownership ofthe economic base of the economy allows formore IPOs and debt issuance from a varietyof issuers. A greater scale of financial marketswill increase the weighting of MENA marketsin financial sector indices encouraging moreforeign investment in the region andpotentially higher valuations.

In the MENA equitymarkets, 2015 felt farworse than the marketreturn data shows. Up until July 2015 the markets held uprelatively well as the oil price held in closeto $60. However as investors start torecognise that $60 marked the top for theyear and that $30 was beckoning, equitiesfell precipitously.

We find ourselves pulled between twoscenarios for equities in 2016. One thatsees persistent oil price weakness draggingdown the equity market still further; asecond more positive view that sees abuilding recovery in the second half of theyear based on a stronger oil price and thebenefit of ongoing structural reform.

The bear caseIf we are wrong on a recovery in oil pricesthen the GCC equity markets face a verydifficult 2016. It is already well recognisedthat liquidity is tight in the region whichtends to lead to weaker economic growth.Should the oil price remain anchoredaround $30 liquidity conditions would betough with an inevitable rise in marketinterest rates. The dollar’s strength willundermine the region’s competitivenessleading to the risk of price deflation and afurther fall in corporate profits. One of thecurrent key supports of the market is thedividend yield. However investors will bemindful that in the stress of the Dubai crisisin 2012 dividends were cut or passed.

Whether you take a bear or bull view ofequities, it should be recognised that GCCequity prices have had a significantcorrection and valuations are becomingmore compelling. Given the very low oilprices and difficult fiscal situation withgovernment spending in many countries stillnot matched by revenues the risk is thatmarkets trade at a very low valuationrelative to history before they rebound.Price to book valuations and price toearnings are all low by historical standards.

GCC markets have to be evaluated in lightof oil prices remaining low for longer.The GCC indices remain stronglycorrelated with oil price movements, sincethe economies are largely dependent onoil production. Sentiment and liquidityremain dominant factors. Although themajority shareholding of some banks andpetrochemical companies is sovereign-backed, trading remains retail-driven.

We believe that large-capand high-dividend yieldsare factors that will besuccessful in 2016.


17GCC EQUITIES

How would weposition Gcc equityportfolios?We believe that large-cap and high-dividendyields factors will be successful in 2016.Equity valuations are becoming morecompelling versus local bonds as yieldscreep above bond yields: Some sectors andselect companies (cement, petrochemical,telecom) yield in excess of 8%. However, wewould caution investors to ensure that theyare not investing in value traps. High dividendshave to be sustainable based on a strongbusiness model with good cash flows.

We reiterate our preference for the UAEmarkets over Saudi Arabia and Qatar, withtheir lack of exposure to petrochemicalstocks and where the underlying economyhas a larger exposure to the non-oil sector.The opening od the Etisalat shareholderbase to foreign ownership and inclusion inthe MSCI Emerging market indices has beena large contributor to the Index.

We would initiate or add to GCC equitypositions as soon as we see clear bottoming ofthe oil price and also when geopolitical tensionsin the region recede. We maintain a preferencefor high-quality companies with sustainablecash flows, such as the logistics sector, as wellas for telecom and consumer stocks. Consumerstaples and telecom will benefit over the longerterm from the favorable regional demographicsof a young and growing population. For themoment lower oil prices remain a supportivefactor for the transport and the logisticssector, as well as for the hospitality industry,with lower flight costs benefitting companiesexposed to tourism flows.

GCC Equities Follow Crude Trends Long-Term

-100%

-50%

0%

50%

100%

150%

2011 2012 2013 2014 2015 2016

Brent Crude (5Y%) GCC Equities (5Y%)

Source: Bloomberg

GCC High-Dividend-Yielding Stocks vs Benchmark

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015 2016

GCC Large Cap High-Div Yield Stocks MSCI GCC Index

Source: Bloomberg

UAE indices have outperformed the overallGCC markets over the longer term.


18 UAE REAL ESTATE

The final quarter of 2015 showed no majorsurprises in terms of movement insentiment across the UAE real estatesectors, with the market largely continuingtrends witnessed in the previous quarters.

The residential market has continued toshow a gradual softening across theUnited Arab Emirates, albeit in line withthe majority of commentator expectations,a trend which is likely to continue into theearly part of 2016. There is a generalconsensus from market monitors that thedecline in residential values andtransactional volumes is attributed to acombination of increased supply andreduced sentiment. The sustained deliveryof apartment and villa developments sincethe market’s recovery, post 2008-09financial crisis, has now seen a largenumber of residential developments andmaster-planned projects completed anddelivered to market. This has placedpressure on residential prices. Officialsupply has started to slow in 2015 Y-o-Y.

The UAE’s office market in contrast hasproved to be more resilient over 2015,with the economy being buoyed by thegrowth of entrepreneurial business start-ups and SMEs. The UAE’s position as aglobal hub, with its continually enhancedlifestyle offerings, means the countryremains attractive to both regional andglobal businesses to establishing apresence locally. New businesses withinthe UAE can benefit from relative ease ofincorporation and low startup costs, bothwithin Dubai, Abu Dhabi and the widerEmirates, further encouraging growth.Office rents across the UAE have broadlyremained unchanged quarter on quarter,with the outlook for the commercial marketremaining stable. It is worth noting thatthe UAE’s office market has yet to see anymajor fallout from the oil pricemovements, which may have a negativeimpact on space requirements shouldcompanies start to drop staff.

As a general comment, the interest rateupward movement in the US is unlikely tohave a significant impact on institutionalinvestment into local real estate as thespread between real estate yields and debtremains healthy. Tightening availability ofdebt in local markets is having more of anegative effect on UAE real estate than theincrease in interest rates.

Hospitality figures are reflecting pressure on growth with occupancy levels remainingrelatively high for the region and daily ratesstarting to fall. Despite these factors, thereremains a growing demand for 3* and 4*hospitality and many developers are nowfocusing on this sector. According to marketcommentators the local hospitality market isexpected to be relatively flat to negative in2016 with a pick-up in activity in 2017.Investors into this sector remain cautiouswith many adopting a “wait-and-see”approach to acquisitions and newdevelopments.

DubaiApartment and villa prices continue to showsigns that the correction in the residentialmarket is still taking place, and looking likely to move into the 2016. Marketcommentators have suggested that themarket-wide dip in residential values tendsto fall in the region between 10-15%,depending on data catchment. Furtherevidence from Dubai’s Land Departmentalso supports this view, reporting a declinein total transactional volumes and values by33% and 28% as of November 2015 incomparison to the same time period in 2014.This clearly evidences a drop in demand forresidential units across Dubai in 2015 whichlinks back to negative key macroeconomicindicators over the same period.

Rents across Dubai slightly down butremain less affected than prices over the 12month period in 2015. There are still a fewareas showing signs of growth including

DuBAI RESIDENTIAl (AED/sq ft)

Nov 2015 Apartment Villas

Residential Prices 1,315 1,274

Residential Rents 101.52 75.72

Source: REIDIN.com

NO MAJORSURPRISES


19UAE REAL ESTATE

Jumeirah Village Circle (JVC) and JumeirahVillage Triangle (JVT) which have bothbenefitted from infrastructure improvementsand the addition of community retail. Thishas drawn tenants into these previouslyless-established areas who are looking for acombination of affordability and lifestyle.

Dubai’s office sector showed signs of amoderately subdued Q4 in 2015 incomparison to 2013 and 2014, however,demand remains positive for good qualityoffice space in the right location, drivenoften by business’ expansion requirementsor consolidation of satellite offices. Themost active market segment continues toflow from the start-up and SME business,whose office footprint tends to fall in therange of 2,500 to 5,000 sq ft units, withexpansion from these offices leading thenumber of enquiries across the market.Larger occupiers, typically linked to thelegal and engineering sectors haveaccounted for larger deals across Dubai(40,000 sq ft+) within 2015. However, as

suitable options for value and quality spaceacross Dubai are limited, a number ofoccupiers have engaged themselvesdirectly with developers to build outcustomised solutions. Deals such as thesecan take up to 36 months to meet themarket, and perhaps an explanation for thesplit in activity.

The recently reported transaction of GRDI’sStandard Chartered Building in Downtown,Dubai to Kuwait Investment Authority for areported AED 650mil (c.USD 180mil) is proofthat Dubai remains one of the preferredregional cities for GCC real estate investment.

Abu DhabiThe real estate market in the capital hasbeen slightly more resilient to marketpressures in 2015, when compared to otherEmirates, notably at a much lesser extentthan the equivalent Dubai market, withapartment prices in the down -3% YTD, andvilla prices stable with around 1% growth

YTD. The rental market has also remainedstable although some agents are claiminglarge increases of +5% for sought afterdevelopments. This stabilised rental markethas been a reassuring sign following theremoval of the rental caps in Abu Dhabitowards the end of 2013.

The office sector has seen modestincreases in rental rates in 2015 up to 7%for quality stock which remains in limitedsupply. Landlords holding some of lessdesirable buildings in Abu Dhabi arelowering rental to lease empty space. Onthe whole demand has been flat with thelower oil price raising concerns about futuregovernment spending, stalling expansionplans for many private companies’ reliant ongovernment contracts.

Similar to the other real estate sectors inAbu Dhabi, the hospitality sector has held itsground in 2015, with RevPARs up 2 % YoYand occupancy levels up 2% YoY at 74% onaverage over the last 12 months. A decisionby the Abu Dhabi Tourism and CultureAuthority (ADTCA) to limit the number ofnew hotel licenses should keep the marketbuoyant in 2016 by controlling supply.

other EmiratesIn previous years, the real estate markets inother Emirates’ surrounding Dubai and AbuDhabi tend to track these two larger, moreestablished areas, typically with a lag of 6-12 months. Sharjah and Ajman, with theirclose proximity to Dubai, are also starting toexperience negative pressures, especiallyon their residential markets, as competing,affordable options are delivered insecondary locations within Dubai.

ABu DHABI RESIDENTIAl (AED/sq ft)

Nov 2015 Apartment Villas

Residential Prices 1,350 899.8

Residential Rents 93.36 61.56

Source: REIDIN.com

The UAE’s office market incontrast has proved to bemore resilient over 2015,with the economy beingbuoyed by the growth ofentrepreneurial business

start-ups and SMEs.


20 CURRENCY

fX markets in 2015have mainly beendominated by threethemes:

Policy divergence amongst majorcentral banks.

Extended slump in Oil prices andcommodities.

China growth worries, Surprised Yuandevaluation and impact on chinatrading partner currencies.

It is unsurprising that amongst the majorcurrencies the Canadian dollar was thebiggest loser in 2015, followed byNorwegian Krone, which is also increasinglyused as proxy to oil market. Note that theJPY and CHF managed to hold groundagainst a broadly stronger US dollar. Thiscould be attributed to heightened marketvolatility and risk aversion in third quarter of2015 as well as markets disappointment onlack of action from Bank of Japan and theSwiss National Bank.

DOLLAR STILL INTHE ASCENDANCY?

Safe havens such asJPY and gold should

benefit and riskcurrencies are expected

to remain subduedshould geopoliticalunrest increase.

G10 currency performanceagainst uSD

cANADIAN DollAR-19.1%

NoRwEGIAN KRoNE-18.3%

NEw ZEAlAND DollAR-12.5%

AuSTRAlIAN DollAR-19.1%EuRo

-10.2%SwEDISH KRoNA

-8.4%BRITISH PouND

-5.4%SwISS fRANc

-0.8%JAPANESE yEN

-0.5%Source: Reuters

A

B

C


21CURRENCY

for 2016, we expectthe fX markets to bedriven by followingthemes:

Policy divergence amongst thecentral banks but to a lesser extentcompared to 2015.

China growth deceleration, marketvolatility & gradual Yuan devaluation.

Further weakness in Oil prices andcommodities in H1.

Escalation in Geopolitical tensions.Not to mention the impact of FEDtightening on US and global growth.

Following successful lift off in December,our central view is that we expect the USFederal Reserve to hike the Fed funds rateby 25 basis points in each quarter of firsthalf as labor market improves further andon signs of inflation finally beginning tonudge higher. At the same time EuropeanCentral Bank’s continued easy policystance to counter low inflation is likely to bea driver of a weaker euro towards parity infirst half of 2016. Even if ECB leaves policyunchanged, the ECB policy rate at -30 bpsunder Fed hikes will likely weigh heavily onEuro. However, the cyclical economicrecovery in the Eurozone should accelerateand pave the way for a EUR rebound inlate 2016.

Likewise we see downside risks for AUDand NZD. Both would typically be viewedas some of the most vulnerable currenciesto rising US interest rates. Both currencieshave wide and positive interest ratedifferentials which are at most risk ofbeing eroded.

GBP seems to have taken the brunt ofselling pressure in recent months due tonegative market sentiment related to anearly EU referendum and the flip flop by theBank of England (BOE) on when interestrates could be increased. The UK’seconomic growth is expected to remainsolid with tight labor market conditions.While the referendum discussion maycontinue to weigh on sentiment in the firsthalf, we see a high risk of a BOE rate hike

sometime in Q2/Q3. Further downsidepressure on sterling should therefore belimited beyond 1.45 where we see a longterm value in the currency.

The JPY has strengthened after the Bank ofJapan’s unexpected and ratherdisappointing announcement of the policychange to expand the maturity of JapaneseGovernment Bonds (JGBs) it waspurchasing. In our view this has greatlyreduced the probability of further easingmeasures over the next few months.Japanese politicians are also wary of amuch weaker yen which leads to real wagelosses due to imported inflation. Wetherefore feel that the risks are skewedtowards a stronger JPY in 2016 as marketsreadjust its expectations of substantialpolicy easing by BOJ. Likely high volatilityand flare up in Geopolitical tensions alsoadd weight to our expectations of a strongerJPY towards 1.10 during this year.

China growth deceleration, market volatility& gradual Yuan devaluation – The Chineseeconomic outlook remains worrisomeamidst overcapacity, high leverage anddeclining exports mainly due to stillovervalued Yuan and low global growth.This year we expect the authorities to allowgradual weakening of CNY to 6.75-6.80(with a high risk of 6.95) to support exportgrowth. This would likely put furtherpressure on China’s Asian trading partnercurrencies such as Korean Won, TaiwaneseDollar, and Malaysian Ringgit.

Further weakness in Oil prices andcommodities in H1 - Oil prices sold offagain during last quarter of 2015 asoversupply continues to mount. So farneither Saudi Arabia and its Gulf partnersin OPEC, nor Russia has given anyindication of a unilateral production cut forfear of giving up market share. While themarket expects a sharp cut in US shaleproduction, it may be balanced out by Iranincreasing exports by 500K bpdimmediately after sanctions are lifted. Wetherefore expect Oil prices to remain underpressure in first half of 2016 leading topotential weakness in the Canadian Dollar,Russian Ruble, Brazilian Real andNorwegian Krone.

Similar to oil, most commodity marketscontinue to face supply glut along with

languishing demand on account of Chinaslowdown. In our views commodity priceweakness coupled with a stronger dollar,and increased volatility in markets wouldadd to renewed selling pressure on Aussieand Kiwi.

An escalation in Geopolitical tensions -Continuation of tensions between Russiaand the West, heightened regional conflictin Middle East, Possibility of more Paris-style attacks across Europe, Xenophobiaand anger surging across Europe and theUnited States are some of the geopoliticalrisks which FX markets could deal with in2016. Although hard to quantify the likelyimpact and difficult to forecast, safehavens such as JPY and gold shouldbenefit and risk currencies are expectedto remain subdued should geopoliticalunrest increase.

ouR coNVIcTIoN IDEASTHIS yEAR ARE:

1. Buy USD Asia

2. Buy USDCNH

3. Short EURUSD,AUDUSD, NZDUSDin first half

4. Long GBPUSDbelow 1.45

A

B

C

D


22 INDIA

India – further goodreturns in store if theworld can calm down

2015 was a year of hope over delivery forthe Indian equity market.

As we look into 2016 the absolute outlookfor Indian equities is hampered by globalproblems particularly in China. The questionis whether India’s own fundamentals canoverwhelm the headwinds from globalproblems. A relative judgement is far easieras India’s strong GDP growth, scope forrate cuts and hope for some furthermeaningful reforms in 2016 should retaininvestor interest.

Indian equities have been the investment ofchoice for international investors inEmerging Markets (EM), which has led toIndia’s outperformance against EM in bothdollar and local currency terms. There hasalso been an increased uptake fromdomestic investors. The main equity indexthe Sensex has fallen 7% over one year andtrades at 14.3x forward earnings. Earningsgrowth for the next fiscal year is estimated at20%. The MSCI EM Index has fallen 19%and trades at 9.5x forward earnings.

There are a number of catalysts for theequity market to at least retain its premiumrating in 2016.

There is a hope that the next budget at theend of February will bring further promisesof reform and a commitment to greatergovernment spending than previouslythought. India has a well known lack ofinfrastructure. Efforts to improve even basicstandards of infrastructure should have asignificant payoff of reducing the number ofbottlenecks around the country that onlyadd to the medium term inflation.

The recent drop in oil prices that came as asurprise to the markets should provide afurther downward surprise to inflation.Lower than expected inflation will givefurther scope for the Reserve Bank of Indiato cut interest rates.

The ongoing recapitalisation of state banksshould allow for a fall in market interestrates. One of the frustrations for the markethas been that although official interest rateshave fallen interest rates to the ordinaryperson in the street have been slower tocome down. India really needs to have astronger credit cycle where consumers,motivated by a stronger economy but alsocrucially by lower interest rates are preparedto take on more credit. Urban populationgross credit growth has been running at just10% compared to well over 20% in the past.

Structural reform is the perennial hot potatothat the government has struggled to meetmarket expectations on. The introduction ofa country wide GST tax which should havebeen straight forward has been held up inparliament filer busting and the landacquisition bill appears likely to beintroduced state by state to get around thepolitical challenges.

GOOD NEWS, BUTWHEN WILL THE ASSETMARKETS PERFORM?

Healthcare31.0%

Technology11.2%

Consumer Goods10.4%

Telecoms10.3%

India Industrial Production YoY%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Bloomberg

Source: BloombergSENSEX Index. CY Ending: 16 Feb 2015 - 15 Feb 2016


23INDIA

Consumption should see a boost from theimplementation of the Seventh PayCommission coming into operation from the1st January 2016. The pay commissiontakes place every 10 years and on thisoccasion covers 4,700,000 centralgovernment employees and 5,200,000pensioners. It has recommended a 23.6%increase in salary, allowances and pensionof government staff

Like 2015 we expect the current year’s GDPgrowth to be driven by stronger privateconsumption and Government capitalspending. This is positive for infrastructurestocks as well as consumer discretionary.

Auto companies have also been thebeneficiaries of low oil and vehicle salesare showing a recovery. Passenger vehicledemand (growth in 2016 estimated >15%)is expected to be strong across productcategories, led by new launches. 2Wheeler companies could witnessupgrades on mid market penetration.

Healthcare companies have exhibitedstrong sales and earnings growth in 2015and this could continue into 2016 as anincrease in per capita income thatimproves affordability. There are mediareports on healthcare companies may beexempt from GST.

We prefer private banks to public sectorbanks as they do not have the overhang ofinfrastructure debt and have strong capitalbases. The government has alreadypumped in USD 10 bn to recapitalise staterun banks.

If it was just about the Indian economic andmarket fundamentals alone the equitymarket would in our view have a positiveoutlook. A combination of better earningsin the Q3 FY2015 results season andmarket expectations of measures to boostgrowth in the next fiscal year’s budgetwould typically lead to some good absolutereturns. However the market is also havingto contend with negative sentiment from theproblems in China. The INR has been undersome downward pressure against the dollaralthough the currency has performedadmirably well versus other emergingmarket currencies. Given the relativelyclosed nature of the Indian economy aweaker Chinese yuan is not going to see asignificant diminution of India’s GDP growth.Manufacturing sector exports are fractionalas a percentage of GDP.

Indian equities havebeen the investment

of choice forinternational investors in

Emerging Markets.

SAlES GRowTH cy 2015Healthcare, technology and

consumer the winners


24 CHINA

HOW BAD IS CHINA?

china is important.Ranking as the secondlargest economy in theworld, china today iscrucial to thedevelopment of globalgrowth. Between 2007and 2014 china savedthe global economy.The massive increases in governmentspending and the tremendous increase inhousing activity all contributed to pushingChinese growth to the 10% level, in supportof a global economy that was on its knees.As the FT recently reported, China pouredmore concrete between 2011 and 2013than the US did in the whole of thetwentieth century.

After the breathtaking economic growth,the Chinese economy is now in need ofconsolidation. The pace of growth broughtproblems. Imbalances were built that theauthorities now have to unravel. Thegovernment is also looking to the future.The economy is on a path to integration inthe global financial system which bringsits own challenges, particularly with theChinese currency the renminbi. Thegovernment is also trying to reshape theeconomy turning it away from a highdependence on exports andmanufacturing encouraging domesticdemand and the service sector.

Change inside emerging markets does notcome without some pain. Within acommunist political system change occursby decree which on the surface impliescompunction and with pace, however it alsoassumes that the decrees are well thoughtout and implementable, which is not alwaysthe case. China will need time, when theglobal community is demanding speed.

MSCI China Index120

100

80

60

40

20

02001 2004 2007 2010 2013 2016

Source: Bloomberg

Chinese Market Bull and Bear

6000

8000

10000

12000

14000

16000

Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16Source: Bloomberg


25CHINA

Change in China also occurs at a time when the financial system is still nascent.A communist system trying to appearcapitalist is at times painful to watch. Thelast twelve months has witnessed a boombust in its equity market, but to be fairsomething not uncommon in the westernworld. The currency was on a one way pathof strength and now seems at timesdestined for persistent devaluation.

The reality is that China still has the abilityto contribute positively to the globaleconomy over the medium term. Whilstthere are arguments over the accuracy ofeconomic data releases, there is nodenying that China is a large economy, witha population of 1.2 billion people. Even ifthe GDP growth were in reality half of thelevel that is reported, it would still representa level of growth that comfortablysurpasses that of the rest of the world.

The reality is that China has a significantchallenge in its financial system with largedebts of state owned enterprises that willneed to be assumed in some way by thegovernment. State enterprises will have tobe reformed to free up the invested capitalbase of the economy. Wasting still morecapital on inefficient state ownedenterprises would be a step backwards.

Undoubtedly the transformation of theeconomy from one based on exports andmanufacturing to one based on domesticdemand and service sector will not be easy.The reform and change in the statecontrolled enterprises will not be smooth butwe suspect that asset markets today arediscounting Armageddon rather than thelikely muddle through.

Some positive trends are deeply entrenchedand will provide the backbone of good news.The oft spoken of rise of the middle classes isnow a phenomenon with real momentum.The FT ran a story recently talking about themassive over subscription of entries tomarathon runs whereas in the past theystruggled to get any runners. Middle classesare in massively increasing numbersconsuming the fitness regime of gyms, healthyeating, fitness trainers and marathons.

The Chinese equity market may take somemonths to stabilise. Having swept from bullmarket to bear market within a year, the

market will need to find time to find a level.We suspect that international investors willprefer to take on China exposure throughinternational stocks that have a largerelationship with China rather than throughdomestic equities.

Chinese debt markets don't lookparticularly cheap in a global context butare still well supported by local liquidity.The central bank the PBOC is likely tocontinue to loosen monetary conditionsthrough modest interest rate cuts, butmainly through further cuts in the reserverequirements of local banks. The latteradds substantially to local investors.

chinese consumption – in numbers

Risk aversion andmarket volatility rosedramatically with thedevaluation of theChinese currency.

The size of China consumer economy by 2020, even if its annual economic growth slows to 5.5 per cent over the next five years It will be second to the United States’ consumer market, which is forecast to expand to US$ 15 trillion.

1.3TIMES

6.5US$ TRILLION

The US$2.3 trillion increase in China’s consumption by 2020 alone will be comparable to adding a consumer market 1.3 times that of Germany or Britain. The spike will come from the rise of the upper-middle-class and affluent households, younger consumers and e-commerce.

The share of upper-middle-class and affluent households – those with more than US$24,000 in annual disposable income in China by 2020. These households now make up 12 percent of all urban households, up from 7 percent in 2010.

Yearly consumption growth among upper-middle-class and affluent households, compared to 5 percent among lower-earning households.

The share of total consumption by China’s youth – those born in the 1980s and later. Consumption by the younger generation is growing at 14 percent annually, twice that of consumer older than age 35.

The e-commerce market’s share of total private consumption by 2020. Online transactions now account for 15% of domestic consumption, up from 3% in 2010.

30PERCENT

17PERCENT

53PERCENT

24PERCENT

Source: The Straits Times


26 GOLD

The worst for goldcould be over verysoon.We see some of the main factors suppressingthe gold price in the recent years beginningto fade. We expect prices to find a floor nearUSD1,000-1025 an ounce before witnessinga strong recovery towards USD1,250 -USD1,325. A combination of factors discussedbelow lead us to believe that 2016 will be aturnaround year for the yellow metal.

Physical SupplyDemandWe expect global demand to remain stablefrom India, China and Europe in the form ofjewelry, bar and coin investment but minesupply is expected to finally begin to taperoff in 2016 after growing steadily since2009. Low prices in recent years haveforced mining companies to cut back oncapital expenditures. The long-running buildin gold output is therefore expected to startturning lower on relative lack ofdevelopment going into the industry.

Price of gold at current levels is close to thereal all-in sustainable cost of production for alarge number of producers. Any substantialdrop in prices from here will forcecompanies to stop production of unprofitableounces; leading to further build up in supplyside pressure.

Support for gold will also continue to comefrom the official sector with buy-sideinterest from central banks. According tothe World Gold Council estimates Centralbanks collectively have been net buyersfor the nineteen consecutive quarters. Weexpect this trend to strengthen in 2016 aswe believe a number of countries will want

to build up their gold holdings for reservediversification purposes against abackdrop of a potentially fully valued US dollar.

uS DollarA stronger US dollar and uncertainty on thepace of inevitable US interest rate increaseshave proved to be a major headwind forGold in recent years. The tide would soonstart changing in favor of Gold post the liftoff by US Federal Reserve in December.FOMC has emphasised the likely path ofrate increases would be slow and gradual;leading to a positive impact on goldinvestment as investors begin to close theshort positions. We expect dollar to top outin second half of the year after pricing infuture rate hikes, thus providing a big reliefto the beleaguered gold market.

Global and uSinflationGold tends to benefit from rising inflationexpectations. During previous US hikingcycles, the Fed has started to raise rateswhen inflation was already higher than its2% target. This time, the Fed has embarkedupon this cycle ahead of any overshoot.Nevertheless, inflation will head higher inthe year ahead. Labor markets havetightened significantly with the overallunemployment rate down to 5%; puttingupside pressure on wages which areshowing signs of break out after years oftepid gains. These higher wage costs arenot showing up yet in overall inflationbecause of the countervailing impact ofenergy prices and import costs. But, asthese temporary influences fall away during

GOLD TOGLITTERAGAIN IN2016


27GOLD

second half, overall price inflation will beginto increase more rapidly and providesupport to Gold prices.

Market turmoil andGeopolitical TensionsInvestors’ strategy during this lengthyrecovery cycle to pile on the risk assetsand equities in search of higher returnshave paid off quite well. However, 2016looks set to be a challenging year macrorisks abound. We expect investors to bemore circumspect about chasing riskassets higher, indeed even the search foryield may be abeyance. Gold will likelybenefit as investors diversify their portfolioand use it as a viable hedge against largeexposure to equities.

Growing concerns over China’s falteringeconomy and its impact on global growth,return of high volatility amidst wider marketturmoil, Continuation of tensions betweenRussia and the West, heightened regionalconflict in Middle East would give Yellowmetal a huge boost and see it reassertingits role as a safe haven.

GolD MINEPRoDucTIoN

(Tonnes)

3,122 2014

3,0642013

2,8752012

2,8452011

2,7422010

2,6112009

2,4282008

Low prices in recent yearshave forced mining

companies to cut back oncapital expenditures.

Source: Reuters


28 GLOBAL REAL ESTATE

Peak pricing concerns formajor cities in the uS and uKbut liquidity still in abundance.Slower growth in 2016;

Asian property facing twinheadwinds of slower chinagrowth and negative EMsentiment;

Europe and Japan in focus,property fundamentals remain supportive and marketsbenefiting from accommodativemonetary policy.

Global real estate, in line with other riskassets, struggled in 2015 although there wasmixed performance amongst the differentregions. Both the UK and Europeexperienced strong relative and absoluteperformance, the US started brightly beforefalling back mid-year in anticipation of a risein interest rates whilst Asia was hamperedby China’s woes.

After several consecutive years of robustgrowth, extravagant capital inflows andsupportive monetary policy, prime realestate values in major gateway cities in boththe US and the UK are now in excess oftheir pre-financial crisis levels. Limited creditavailability for risky activities like propertydevelopment has generally restricted supplyin these markets which has led to strongrental growth as occupational demand hasrecovered. Appreciating rents are now themain component of property returns inthese markets as there is little scope foryields to compress further in a rising rateenvironment. However, there is still anoverabundance of liquidity, particularly forcore assets in Central London andManhattan, so there is little prospect for aprecipitous drop in values. Instead, therewill be slower growth for property markets inthe US and UK in 2016, especially whencompared to preceding years, as investors

turn their attention to more ‘value-add’properties, secondary locations oralternative assets. The attraction ofalternative real estate is not just in currentlysuperior income yields, but that returns areoften driven by factors with a low or evennegative correlation with other economic orproperty market drivers. Indeed, over a thirdof all property transactions in the UK in2015 were outside of the core sectors ofoffice, retail and industrial and the top 10largest property deals of the year weredominated by purchases of large studentliving and hotel portfolios by NorthAmerican institutions.

Asian real estate continues to be affectedby the twin headwinds of slower economicgrowth in China and from general

weakness in emerging markets sentiment.However, property investment activity hasremained largely insulated from theseissues as market uncertainty and volatilitytends to lead investors away from otherasset classes into the security of bricks andmortar. Japan continues to be the focus ofthis investment activity with both domesticand international investors attracted tocore, income-producing assets,predominantly in Tokyo, where spreadsbetween property yields and financingcosts continue to be accretive. The Bank ofJapan’s monetary policy also remainssupportive of property investment.

This leaves Europe as the main focus forglobal real estate investors as the recoveryhere was delayed due to persistent

IS THEPARTYOVER?

GlobalREITs

Tota

l Ret

urn

%UK

CommercialProperty

UKREITs

Global Property, Total Returns FY2015 (local currency)

EuropeanEx UKREITs

AsiaPacificREITs

USREITs

-10%

-5%

0%

5%

10%

15%

20%

25%

0.1%

13.0% 12.1%

18.8%

-7.3%

3.0%

Pric

e In

dex,

Dec

-00

= 10

0

US Commercial Property Price Indices

US All Types NYC Manhattan OfficeUS Office CBD

0

100

200

300

400

500

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Source: Morningstar, MSCI, 2016. Data from 01.01.2015 to 31.12.2015. * YTD includes estimate of Dec '15 total return

Source: Real Capital Analytics / Moodys, 2015


29GLOBAL REAL ESTATE

economic turbulence from Greece et al, butthe property market is now firmly on the frontfoot driven by strong investor demand andrecovering fundamentals with the addedbenefit of the ECB’s QE programme. Therecovery has continued to gather pace overthe course of 2015 and almost all Europeancountries have experienced large annualincreases in transaction volumes particularlyin the stronger Western Europeaneconomies of Germany, France, Benelux aswell as in the Nordics. By contrast, investorsin Russia and other Central and EasternEuropean countries have been affected bysanctions (in the case of Russia) and poorsentiment on emerging markets in general.

Domestic funds, pension funds, insurancecompanies and listed property companies /

REITs have been the principal buyers ofEuropean property to date. Their focus hasbeen on prime, yielding assets in gatewaycities in home markets. However, there hasbeen steady movement up the risk curveinto more ‘value-add’ assets to capture themarket recovery and cross borderinvestment is rising rapidly with Asianinstitutions and US opportunity funds notablyactive. The latter has been attracted to thecomparatively cheap real estate on offer inperipheral Europe, especially in Spain andIreland, and they have been the dominantbuyers here over the past couple of years,often via acquisition of the underlying debt.

2016 should see further improvements inproperty market conditions and continuingdomestic and international capital inflows.

Supported by ongoing monetary stimulus,this will drive European real estate valuesforward throughout the year. Eurozoneproperty equities have been the mostimmediate beneficiary of the marketrecovery, outperforming almost all otherEuropean equity sectors in 2015 despite amid-year sell-off, and represent an efficientway to gain immediate exposure.

Ann

ual M

arke

t Tur

nove

r EU

Rbn

European Commercial PropertyMarket Transactions 2007 - 2015

2007 2008 2009 2010 2011 2012 2013 2014 20150

20406080

100120140160180200

176

90

45

6779 79

100

150171

Appreciating rents are nowthe main component ofproperty returns in thesemarkets as there is littlescope for yields tocompress further in a risingrate environment.

Source: CBRE, JLL, 2016

Inde

x, 0

1 Ja

n 20

15 =

100

FTSE EPRA/NAREIT Developed Asia Index vs.MSCI AC Asia Pacific Index FY2015

FTSE EPRA/NAREIT Dvlp Asia PR USD MSCI AC Asia Pacific PR USD

85

90

95

100

105

110

115

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Source: Morningstar, 2015. Data from 01.01.2015 to 31.12.2015


30 OUTLOOK

PROTECTING ANDBUILDING YOURWEALTH IN 2016

US FED SUPPRESSES MARKET VOLATILITY AND BOOSTS EQUITY RETURNS In theory investors should hold a portfolio well-diversified across asset classes to weather theups and downs of markets. Maintaining sucha disciplined approach has been challenged inrecent years, as quantitative easing has attimes made risk seemingly riskless 2012-14,while in 2015 it felt like everything wouldlose you money including cash.

We look at some of the disciplines that webelieve investors must hold to, as we moveinto what may prove to be a very trying 2016.

Diversification maynot work perfectlyduring times of stressbut it still worksUnfortunately the benefits of diversificationcan be partially challenged at times ofheightened market volatility. Many investorswill think back to 2007-009 when it seemednothing offered protection from the collapsein the world financial crisis, but in fact twoassets did. US treasuries and gold. Since 2009, due to the huge flows of centralbank liquidity into global financial markets,correlations between asset classes haverisen materially.

The waves of capital entering asset marketshas also suppressed market volatility.Between 2013 and early 2015 FederalReserve easy money policies dampenedthe riskiness (volatility) of many assetclasses to levels well below previous norms.

Equally, if the central banks start to reducetheir quantitative easing as the Fed hasdone in recent quarters, we may seecorrelated downside to the asset marketsand also higher volatility. The good news isthat we expect at least the ECB and theBank of Japan to continue to providesignificant injections of capital into themarkets in 2016.

However even with these highercorrelations there is good evidence thatsome assets will still provide protection toan investor’s wealth during times of stress.The best performing asset class in thisrespect is US treasuries, which tend todeliver a positive performance duringmarket downturns. The next best assetbased on historical data is investment-grade(IG) bonds. We believe a cautious investorfor 2016 should have an allocation skewedtowards government and investment gradebonds. Such a portfolio would allow thecautious investor to diversify risk, ratherthan to maximise returns.

More aggressive investors can diversifyreturn by adding a defensive bias to theirstrategic asset allocation. This would beachieved being overweight credit versusequities and, within equities, overweightdeveloped versus emerging markets (morevolatile than DM). Credit exhibits in generallower volatility versus equities and tends toperform better during times ofmacroeconomic uncertainty, but stablegrowth (table 2). Although global growth isexpected to be steady for 2016 (3.3%)versus 2015 (3.1%), uncertainty about theoutlook remains relatively high.

Investors who wish to diversify their returnscan also look to add gold to their portfolios,or to add funds pursuing absolute returnstrategies.

After DM government bonds, gold tends tohave the lowest average correlation to majorasset classes. The Asset Class Correlationschart illustrates that, in a portfolio of 9 assetclasses, DM government bonds have anaverage 10-year correlation to other assetswhich is close to 0%; gold has an averagecorrelation slightly above 40%, while for allother asset classes the average correlationruns significantly higher.

Absolute return investment strategies attemptto deliver positive returns irrespective of marketdirection. Returns for these strategies tend tobe smoother, although lower than the overallmarket return when this is strongly positive. Asa result of rising volatilities and correlations,portfolios have recently tended to exhibit morefrequent drawdowns (losses incurred from peakto trough). A partial remedy to this is offered bydiversification via hedge funds. The investor isadvised to select absolute-return funds withproper track-record to this purpose, as it is notso obvious that a broad-based hedge-fund-tracking index adds significant value.

Fed Intervention & Equity Volatility5000000 70

60

50

40

30

20

10

0

4000000

3000000

2000000

1000000

02006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fed Balance Sheet (LHS) US Equity Volatility

Source: Bloomberg


31OUTLOOK

Portfolio Positioning for Tough Times

GOLD HAS THE SECOND LOWEST CORRELATION TO MAJOR ASSET CLASSES

Cautious’, ‘Moderate’ and ‘Aggressive’ portfolios match the risk profiles for clients.

Asset Class Correlations

Average 10-Year Correlation of Each Asset Class with All Others

DM GvtBonds

Gold HedgeFunds

EMBonds

IGCorp

Reits DMEquities

HYCorp

EMEquities

0.00.1

0.20.3

0.40.5

0.60.7

0.01

0.45

0.570.61 0.63 0.64 0.65 0.68 0.68

Source: Bloomberg

Source: PB-CIO office

Asset Sub Asset Portfolio Portfolio Portfolio class class Positioning Positioning PositioningCash USD Cash 14.3% 7.0% 6.8%Bond 50.7% 38.0% 23.2%

DM Gvt Bonds 35.0% 19.2% 8.0%Global IG Bonds 10.6% 13.3% 11.0%Global HY 3.2% 3.5% 2.7%

Inflation Linked 0.0% 0.0% 0.0%EM Bonds 1.9% 2.0% 1.5%MENA Bonds 0.0% 0.0% 0.0%

Equity 27.0% 40.0% 53.0%US 12.5% 17.7% 24.9%

Euro Zone 6.0% 8.7% 10.5%UK 2.1% 3.0% 4.0%Japan 5.1% 6.3% 7.8%

Asia Pac ex Japan 0.0% 1.8% 2.4%EM 1.3% 2.5% 3.4%FM 0.0% 0.0% 0.0%

Alternative 8.0% 15.0% 17.0%Commodities 3.0% 5.0% 7.0%Hedge Funds 3.0% 5.2% 5.2%Real Estate 2.0% 4.8% 4.8%

Total 100.0% 100.0% 100.0%Expected Return 4.1% 5.6% 6.6%Expected Volatility 8.3% 12.0% 14.4%

cautious Moderate Aggressive

The good news is thatwe expect at least theECB and the Bank ofJapan to continue toprovide significant

injections of capital intothe markets in 2016.


CONTRIBUTORS32

CONTRIBUTORSGary Dugan – Chief Investment Officer

Tim Fox – Head of Research & Chief Economist, Global Markets & Treasury

Edward Bell – Commodity Analyst

Giorgio Borelli – Senior Manager Asset Allocation

Nigel Burton – Director Real Estate

Anita Gupta – Head of Equity Strategy

Khatija Haque – Head of MENA Research

Yahya Sultan – Fixed Income Strategy

Anthony Taylor – Fund Manager, Real Estate

Raman Trehan – Head of FX/Commodity Advisory & Strategy

Anita Yadav – Head of Fixed Income Research


DISCLAIMER 33

DISclAIMERWhile Emirates NBD uses reasonable efforts to obtain information from sources which it believesto be reliable, Emirates NBD makes no representation that the information or opinions containedin this publication is accurate, reliable or complete and Emirates NBD accepts no responsibilitywhatsoever for any loss or damage caused by any act or omission taken as a result of theinformation contained in this publication.

This publication is provided on a confidential basis and is for informational uses only and is notintended for trading purposes. Data/information provided herein are intended to serve for illustrativepurposes. The data/information contained in this publication is not designed to initiate or concludeany transaction. In addition, the data/information contained in this publication is prepared as of aparticular date and time and will not reflect subsequent changes in the market or changes in anyother factors relevant to the determination of whether a particular investment activity is advisable.This publication may include data/information taken from stock exchanges and other sources fromaround the world and Emirates NBD does not guarantee the sequence, accuracy, completeness,or timeliness of information contained in this publication provided thereto by unaffiliated third parties.Moreover, the provision of certain data/information in this publication is subject to the terms andconditions of other agreements to which Emirates NBD is a party.

None of the content in this publication constitutes a solicitation, offer, opinion, or recommendationby Emirates NBD to buy or sell any security, or to provide legal, tax, accounting, or investmentadvice or services regarding the profitability or suitability of any security or investment. Thispublication is not intended for use by, or distribution to, any person or entity in any jurisdiction orcountry where such use or distribution would be contrary to law or regulation. Accordingly, anythingto the contrary herein set forth notwithstanding, Emirates NBD, its suppliers, agents, directors,officers, employees, representatives, successors, assigns, affiliates or subsidiaries shall not, directlyor indirectly, be liable, in any way, to you or any other person for any: (a) inaccuracies or errors inor omissions from the this publication including, but not limited to, quotes and financial data; (b)loss or damage arising from the use of this publication, including, but not limited to any investmentdecision occasioned thereby. (c) UNDER NO CIRCUMSTANCES, INCLUDING BUT NOT LIMITEDTO NEGLIGENCE, SHALL EMIRATES NBD, ITS SUPPLIERS, AGENTS, DIRECTORS,OFFICERS, EMPLOYEES, REPRESENTATIVES, SUCCESSORS, ASSIGNS, AFFILIATES ORSUBSIDIARIES BE LIABLE TO YOU FOR DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL,SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES EVEN IF EMIRATES NBD HAS BEENADVISED SPECIFICALLY OF THE POSSIBILITY OF SUCH DAMAGES, ARISING FROM THEUSE OF THIS PUBLICATION, INCLUDING BUT NOT LIMITED TO, LOSS OF REVENUE,OPPORTUNITY, OR ANTICIPATED PROFITS OR LOST BUSINESS.

The information contained in this publication does not purport to contain all matters relevant toany particular investment or financial instrument and all statements as to future matters are notguaranteed to be accurate. Anyone proposing to rely on or use the information contained inthis publication should independently verify and check the accuracy, completeness, reliabilityand suitability of the information and should obtain independent and specific advice fromappropriate professionals or experts. Further, references to any financial instrument orinvestment product are not intended to imply that an actual trading market exists for suchinstrument or product.

This publication does not provide individually tailored investment advice and is prepared withoutregard to the individual financial circumstances and objectives of person who receive it. Theappropriateness of an investment activity or strategy will depend on the person’s individualcircumstances and objectives and these activities may not be suitable for all persons. In addition,before entering into any transaction, the risks should be fully understood and a determination madeas to whether a transaction is appropriate given the person’s investment objectives, financial andoperational resources, experiences and other relevant circumstances. The obligations relating toa particular transaction (and contractual relationship) including, without limitation, the nature andextent of their exposure to risk should be known as well as any regulatory requirements andrestrictions applicable thereto.

In publishing this document Emirates NBD is not acting in the capacity of a fiduciary or financial advisor.

Data included in this publication may rely on models that do not reflect or take into account allpotentially significant factors such as market risk, liquidity risk, and credit risk. Emirates NBD mayuse different models, make valuation adjustments, or use different methodologies when determiningprices at which Emirates NBD is willing to trade financial instruments and/or when valuing its owninventory positions for its books and records.

Investment in financial instruments involves risks and returns may vary. The value of and incomefrom your investments may vary because of changes in interest rates, foreign exchange rates,prices and other factors and there is the possibility that you may lose the principle amount invested..Past performance is not necessarily a guide to future performance. Estimates of future performanceare based on assumptions that may not be realized. Before making an investment, investors shouldconsult their advisers on the legal, regulatory, tax, business, investment, financial and accountingimplications of the investment.

Recipient AcknowledgementsIn receiving this publication, you acknowledge and agree that there are risks associated withinvestment activities. Moreover, you acknowledge in receiving this publication that the responsibilityto obtain and carefully read and understand the content of documents relating to any investment

activity described in this publication and to seek separate, independent financial advice if required toassess whether a particular investment activity described herein is suitable, lies exclusively with you.

You acknowledge and agree that past investment performance is not indicative of the futureperformance results of any investment and that the information contained herein is not to be usedas an indication for the future performance of any investment activity.

You acknowledge that this publication has been developed, compiled, prepared, revised, selected,and arranged by Emirates NBD and others (including certain other information sources) through theapplication of methods and standards of judgment developed and applied through the expenditureof substantial time, effort, and money and constitutes valuable intellectual property of Emirates NBDand such others.

All present and future rights in and to trade secrets, patents, copyrights, trademarks, service marks,know-how, and other proprietary rights of any type under the laws of any governmental authority,domestic or foreign, shall, as between you and Emirates NBD, at all times be and remain the sole andexclusive property of Emirates NBD and/or other lawful parties. Except as specifically permitted inwriting, you acknowledge and agree that you may not copy or make any use of the content of thispublication or any portion thereof. Except as specifically permitted in writing, you shall not use theintellectual property rights connected with this publication, or the names of any individual participant in,or contributor to, the content of this publication, or any variations or derivatives thereof, for any purpose.

YOU AGREE TO USE THIS PUBLICATION SOLELY FOR YOUR OWN NONCOMMERCIAL USEAND BENEFIT, AND NOT FOR RESALE OR OTHER TRANSFER OR DISPOSITION TO, OR USEBY OR FOR THE BENEFIT OF, ANY OTHER PERSON OR ENTITY. YOU AGREE NOT TO USE,TRANSFER, DISTRIBUTE, OR DISPOSE OF ANY INFORMATION CONTAINED IN THISPUBLICATION IN ANY MANNER THAT COULD COMPETE WITH THE BUSINESS INTERESTSOF EMIRATES NBD. YOU MAY NOT COPY, REPRODUCE, PUBLISH, DISPLAY, MODIFY, ORCREATE DERIVATIVE WORKS FROM ANY DATA CONTAINED IN THIS PUBLICATION. YOU MAYNOT OFFER ANY PART OF THIS PUBLICATION FOR SALE OR DISTRIBUTE IT OVER ANYMEDIUM INCLUDING BUT NOT LIMITED TO OVER-THE-AIR TELEVISION OR RADIOBROADCAST, A COMPUTER NETWORK OR HYPERLINK FRAMING ON THE INTERNETWITHOUT THE PRIOR WRITTEN CONSENT OF EMIRATES NBD. THE INFORMATIONCONTAINED IN THIS PUBLICATION MAY NOT BE USED TO CONSTRUCT A DATABASE OF ANYKIND. YOU MAY NOT USE THE DATA IN THIS PUBLICATION IN ANY WAY TO IMPROVE THEQUALITY OF ANY DATA SOLD OR CONTRIBUTED TO BY YOU TO ANY THIRD PARTY.FURTHERMORE, YOU MAY NOT USE ANY OF THE TRADEMARKS, TRADE NAMES, SERVICEMARKS, COPYRIGHTS, OR LOGOS OF EMIRATES NBD OR ITS SUBSIDIARIES IN ANYMANNER WHICH CREATES THE IMPRESSION THAT SUCH ITEMS BELONG TO OR AREASSOCIATED WITH YOU OR, EXCEPT AS OTHERWISE PROVIDED WITH EMIRATES NBD’SPRIOR WRITTEN CONSENT, AND YOU ACKNOWLEDGE THAT YOU HAVE NO OWNERSHIPRIGHTS IN AND TO ANY OF SUCH ITEMS. MOREOVER YOU AGREE THAT YOUR USE OF THISPUBLICATION IS AT YOUR SOLE RISK AND ACKNOWLEDGE THAT THIS PUBLICATION ANDANYTHING CONTAINED HEREIN, IS PROVIDED "AS IS" AND "AS AVAILABLE," AND THATEMIRATES NBD MAKES NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO THISPUBLICATION, INCLUDING, BUT NOT LIMITED TO, MERCHANTABILITY, NON-INFRINGEMENT,TITLE, OR FITNESS FOR A PARTICULAR PURPOSE OR USE.

Emirates NBD is licensed and regulated by the UAE Central Bank.

Additional Information for the United Kingdom This publication was prepared by Emirates NBD Bank PJSC in United Arab Emirates. It has beenissued and approved for distribution to clients by the London branch of Emirates NBD Bank PJSCwhich is authorised by the Prudential Regulation Authority and regulated by the Financial ConductAuthority and Prudential Authority in the UK. Any services provided by Emirates NBD Bank PJSCoutside the UK will not be regulated by the Financial Conduct Authority and Prudential Authority andyou will not receive all the protections afforded to retail customers under this regime. Changes inforeign exchange rates may affect any of the returns or income set out within this publication.

Please contact your UK Relationship Manager for further details or to discuss the contents of thepublication

To find out more on Emirates NBD, please visit www.emiratesnbd.com

Additional Information for SingaporeThis publication was prepared by Emirates NBD Bank PJSC in the United Arab Emirates. It hasbeen issued and approved for distribution to clients of Singapore branch. Emirates NBD PJSCSingapore Branch holds a wholesale banking license issued by The Monetary Authority of Singaporeand regulated under the Financial Advisers Act ‘FAA’ Chapter 110 and The Securities and FuturesAct ‘SFA’ Chapter 289. Any services provided by Emirates NBD Bank PJSC outside Singapore willnot be regulated by the FAA and SFA and you will not receive all the protections afforded to retailcustomers under the SFA & FAA regime (where appropriate).

Please contact your Relationship Manager for further details or for clarification of the contents, whereappropriate.

To find out more on Emirates NBD Singapore Branch, please visit www.emiratesnbd.com

EMIRATES NBD PRIVATE BANKINGABU DHABI – DUBAI – LONDON – RIYADH – SINGAPORE

www.emiratesnbd.com

Date post:	14-Oct-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Waking up to reality - Emirates NBDFrom the CIO Office. OPPORTUNITIES TO INSPIRE EMIRATES NBD...

Documents