Krishnan Ramachandran, CEO of Barjeel Geojit Securities, a financial and commodities markets intermediary, discusses key challenges in the market and why relations between the UAE and India keep getting better
How is your industry performing? What are the main challenges?
After 2016, which was probably one of the most challenging years that we faced, 2017 was a good turnaround year for our businesses, which are predominantly in wealth management. Despite a lot of political uncertainty and the expectation that the markets were not going to perform, 2017 was one of the best years that we have seen for a long time. The clients’ return on their portfolios have been very good, and in 2018 the trend as of now still continues. There have been some minor corrections in terms of the markets overall, but it is consolidating. Overall, during the last couple of years the trend has been quite good.
The challenges are more from a macroeconomic perspective in terms of the geo-political situation around the world; for example now we have trade wars. It may have a limited impact on certain economies but it is going to create a sort of imbalance across the world in terms of volatility in the market, which may not be suitable or liked by many of our customers. Interest rates are also moving up in the US and globally, so yield return becomes a challenge. Asset allocation becomes a challenge and has to become more dynamic.
What typically used to be a long-term view of two to three years may not hold in this sort of an emerging environment where we need to be more tuned in to the market situations on a regular basis and try to move into asset classes that are able to cushion this volatility to a great extent.
What do you see as the main opportunities in 2018-19?
The UAE has GDP growth in the region of 1.7 percent, and I think the forecasts predict 3.5 to 4 percent over the next few years. Oil prices are good and there is a lot of financial stimulus that has flowed into this region from various governments. There is, across the region, a drive to make it easier to do business. Investment will come in and once the investment cycle begins then obviously there is going to be more money in the pockets of the people. The investment climate in this region is bound to improve over time. Most of the negative signals that we were seeing till about the middle of 2017 are moving away and there is a sense of optimism coming in.
What trends are we seeing in wealth management?
The risk appetite of an HNI or an ultra HNI is a little more conservative than a mass affluent client, or a client who is in a small SME type of a business. HNIs and ultra HNIs are looking at protection of capital, and a yield which is commensurate with the global market returns. When it comes to the current environment, with rising interest rates, their expectations on yields are going to be much higher. But in terms of structured products, and in terms of leveraging and other issues, there could be challenges in product management. That’s why I mentioned before that asset allocation is the key and is also the choice of markets.
How are trade ties between India and the UAE?
I think we are in a sweet spot where we have never been before, especially after 2014 when the new government was elected under Prime Minister Modi. I think the sort of engagement we are having between India and the UAE and GCC as a whole has been phenomenal. For the first time after so many years India had a Prime Minister visiting countries in the region, including the UAE.
The reception we have received across the GCC has been amazing. We have seen huge investment flows happening and the partnership has moved from an oil-related level to a more strategic level. The UAE is looking at about US$75 billion investment in infrastructure projects in India. The level of engagement is happening at the highest level.
What is your view on leadership?
Leadership has to look at two major criteria; one is to look at the business that we are in, and the other is to look at what is good for your customers in terms of protecting the investments that we are doing. You also need to have your team in line with those thoughts and processes. As an industry, wealth management needs to be more focused on training and knowledge creation, as well as being aware of what the global markets are doing, and of course ensure that there is growth happening in an ethical manner.
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