Dubai: Investors in the UAE looking at overseas markets may prefer to stay in cash as oil prices fluctuate, an official at Bank of New York Mellon said.
“In terms of investors which invest abroad there is some caution there. If oil prices stay at these levels we would see investors rethinking their allocation and may look to be more in cash versus other investment,” said Tarek K. Sherlala, senior executive officer, head of MEA asset servicing at Bank of New York Mellon.
Investors in the UAE looking for optimum returns are looking out as local markets stabilise.
Investments into emerging markets, India or Brazil has been the favourites, while high net worth individuals are keen on alternative investments such as private equity, infrastructure, real estate etc.
Interlink age of oil and monetary policy
Over the course of 7-8 years, it has become apparent that there is a link between oil prices and monetary policy. Oil at times behaves like a quasi financial instrument, the official at Bank of New York Mellon said.
In 2007, just before the financial crisis in United States, despite the fact that oil prices zoomed to $70 (Dh257) per barrel to $149 by August of 2008, despite weak demand.
“If you were getting a negative real interest rate on the dollar where it does not pay you, you need to buy something be it emerging markets or high yields, but people also would like to buy hard assets,” said Simon Derrick, Chief Currency Strategist at Bank of New York Mellon.
Crude has performed like a financial asset and more directly as a financial instrument, adding that price movements in crude oil dependent on shift in monetary policy.
