"Prepare for volatility - and bargains - in the Middle East"

Investors in the region warrant optimism as well as caution in 2010, says Chief Economist at Gulf Finance House Dr Ala’a Al-Yousuf

The Chief Economist at Gulf Finance House predicts a volatile year for economies, financial systems – and investors.

Dr Ala’a Al-Yousuf  says: “Investors in alternative asset classes, need to be careful about policy shifts, in particular the monetary policies being set by the major central banks and the financial regulatory aspects under consideration. 

“As the Gulf States peg their currencies to the US dollar, the most relevant monetary policy to the region is what happens in the US. And of course financial markets are interlinked; therefore what China, the UK and the European Central Bank do are all important for liquidity, price of credit and availability of funding

“Investors in high-risk high-return alternative asset classes need to be very watchful.  By the beginning of 2012 there will be many reforms affecting financial institutions, private equity houses, investment banks and hedge funds. These may affect returns on hedge funds and alternative asset classes in the coming three to four years, as the leverage that was common before the crisis is not going to be available going forward

“In general, investors need to put high weight on liquidity, and make sure that the institutions and the vehicles they invest in are abundantly capitalised. But they should expect returns to be much lower than what they were in the past.”

However a silver lining is emerging. Dr Ala’a Al-Yousuf  says: “Already I see specialist recovery and turnaround funds, bargains in Dubai and other places where there may be distressed investors or sellers trying to cash out; whether it is in the form of secondary market trading in debt, loans that have been offered at deep discounts or real estate opportunities.”

Dr Ala’a Al-Yousuf, Chief Economist at the Gulf Finance House, will be speaking at the Middle East Alternative Investments Summit 2010, 29-31 March, in Dubai .