GCC Markets Suffer Due to Weak Global Environment

By Mohammed Waseem

Investing in the GCC is a good opportunity for foreign investors, be it real estate or the stock market. There are limitations, however and recently the market has been affected quite badly. Property firms and banks in the UAE have been performing badly according to Al Arabiya. However, the risk sentiment has been driving the real estate sector in the UAE.

The underperformance was because of the weak global environment; many leading companies sank and that affected the investors badly. The fall was between 2% and 4% for most companies. Some companies in Saudi Arabia however saw growth even during this downfall. In addition, the central bank chief of Saudi Arabia says that Saudi banks are in a very strong position; they have a capital adequacy ratio of 17.8%, which is way above the minimum specified by Basel standards.

UAE Markets SufferThe central bank of Saudi Arabia is working on maintaining this position and for emphasizing on stability. The country attributed the stability of the market amidst global unrest and turmoil to the balanced monetary policy. The kingdom has also seen an upgraded rating from the rating firm, Fitch Ratings; from an AA- rating, they were upgraded to AA. The kingdom has also been working hard to address other issues including unemployment.

Even though the market is generally weak, Khaleej Times reported that 52% of the UAE residents express confidence in the UAE’s banking system. The conclusion of the survey conducted was that UAE financial institutions are trustworthy enough but they have to do more to convince the rest of the residents to keep their savings onshore. Most of the residents of the UAE are expatriates and they send their earnings back to their countries.

As far as investment in real estate is concerned, UAE court decreed that non-freehold property would be available only for GCC nationals and not all the residents or foreign investors. Freehold property is however available for foreign nationals for investment. In the next article, I will discuss about the freehold property investment in the UAE.

Opportunities for Foreign Investors in the Indian Stock Market

By Mohammed Waseem

Indian stock market is often underestimated in developed countries. Many consider it just another market. In reality, India is among the best markets for investors to consider; it is among the most promising markets in the world. India is a country which has young population and youngsters are encouraged to take part in the stock trading.

India has as many as 22 recognized stock exchanges, including 8 permanent ones. Most of these are limited to local stock trading and are open for Indian citizens alone. However, 2 stock exchanges among these, which are primary trading exchanges, allow foreign investors to take part in the trading; they are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

NSE, MumbaiUntil 1990, no foreign entity was allowed to trade in the Indian stock market. Then, foreign investment was permitted in two forms: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). Investments which involve taking part in managing a business fall under the FDI category, and investments which do not involve taking part in the management of business fall under FPI. For portfolio investments, one has to be registered as an FII (Foreign Institutional Investor) or as one of the sub-accounts of a registered FII. The FII stock trading recently led to over Rs. 5000 crore (@828 million) inflow in just two weeks, according to the Securities and Exchange Board of India (SEBI), which regulates the Indian stock market. This was for business investments, but what about investment opportunities for foreign individuals?

Until the beginning of 2012, Foreign Investors (FIs) were not allowed to invest directly in the Indian stock market. They were allowed, however, to invest by the way of American Depository Receipts (ADR) or Global Depository Receipts (GDR), which are stocks that are traded on the investor’s home-country stock exchange, but represent Indian companies. In other words, Indian companies which are listed on foreign stock exchanges can issue GDRs and ADRs. Additionally, they were allowed to trade in FCCB (Foreign Currency Convertible Bonds).

But the Indian government opened up a little to FIs in 2012, which has made it easier for foreigners to invest in the Indian stock market. Having said this, it should be noted that not every foreigner is qualified to invest in the market. One has to be a Qualified Foreign Investor (QFI) in order to qualify for the investment. A QFI is anyone who is a resident in a country that is a member of Financial Action Task Force (FATF) or member of a group which is a member of FATF, or a resident in a country that is signatory to Appendix A of the International Organization of Securities Commissions (IOSCO)’s Multilateral Memorandum of Understanding (MMoU). List of the qualified countries can be accessed here. Additionally, a QFI must not be a resident of India, nor registered as a FII or a sub-account of a FII.

QFI status allows FIs to directly invest in Indian companies via BSE and NSE. However, there is a limit to the investment for an individual QFI, which is 5% of the equity of an Indian company. The aggregate shareholding of QFIs in an Indian company cannot exceed 10%. They can also invest in mutual funds and Indian corporate bonds in addition the limit for which is $1 billion.

All QFI investments should come through a Depository Participant (DP), which acts as an intermediary between the investor and the depository. The list of DPs under National Securities Depository Limited (NSDL) can be viewed here and the list of DPs under Central Securities Depository Limited (CSDL) can be viewed here. The exchange for NSDL is NSE, while for CSDL, it is BSE. In order to trade in the stock exchange, a QFI has to open a Demat account; each QFI is allowed to open only one Demat account.

Investment in the Indian stock market is considered to be among the most exciting investment opportunities of this time by market experts. Investors looking for a good investment opportunity should consider the Indian stock market.

Smart Investments for 2012

By Joyce Morse for HeadlineFinancial.com

With the current state of the economy, it can be hard to know where to invest your money to still make a profit.  It can make you just want to hide it so that it doesn’t disappear.

However, every smart investor knows that you have to take a risk to make money.  The trick is to know which investments carry an acceptable level of risk and which ones aren’t worth it.  Here are two types of investments that you will want to consider adding to your portfolio in 2012.

Technology Stocks

This can seem like a scary investment because you never know where technology is going, but it can also be extremely profitable.  Why should you consider technology for investment?  Because it has strong growth potential.

Stock market chart rising
What stocks are good buys?

Just look at Facebook and how it has exploded and changed the world.  Facebook is more than just a product; it’s a brand.  Today people say “Just Facebook me” as if it is a term and not a website.

So, how do you know which technology to invest in?  This is one area where the risks can be high, but so can the rewards.  Here are a few tips for investing in this growing area.

  • Know the product.  Does it have a solid foundation with a knowledgeable leader?
  • What do others say about the technology?  Get a lot of feedback before you put money into something.  For every technological advancement that has been successful, dozens of others were failures.
  • Is it innovative?  Look for something that’s new and different that could revolutionize the way we do something.
  • Is it an improvement?  Skype, Instaprint, and Cloud storage are all inventive ideas that improve our lives.  While that doesn’t make them a guarantee to be successful, it does improve their possibilities.
  • Talk with an expert.  Before you put money into anything, you should consult with an expert in the field.  An investor is not an expert in technology; an IT person is.  Find out what they think about the new technology and if it is a sound investment.

Why Stocks are Better than Bonds

Many investors will ignore the stock market in favor of the security of bonds in a down economy.  However, the experts say that stocks are still the better way to go.  They expect that bonds in the next 20 or 30 years will only see a return of zero for best case scenario.  More probably is that they will have a negative return.

S&P stocks sold at 13 times the estimated earnings for 2012 at the end of 2011.  Compare this to 1999 when they were selling at 33.5 times.  This shows that there is potential for growth for investors.

You may not want to put as much money into the stock market as in the past, but experts believe that now is a good time to invest in stocks for the long term results.