Three local UAE investment options to consider

My own view of global financial markets remains pretty bearish. With interest rates on the way up it is going to be tough for global stock markets, so what are the local alternatives? Residents in the UAE - and you do have to live in the UAE to buy stocks, funds or property - have several interesting options at present. The point to note is that oil economies generally do very nicely from high oil prices, and that therefore assets are negatively correlated to the industrialized nations. The logical thing to do is to invest locally, if you are lucky enough to live in the UAE, while the going is tough in international markets. A really smart investor would then revert back to global markets if conditions change direction. Let us consider three options for the average investor. First, buy a UAE mutual fund from one of the bigger local banks. Over the last two years such funds have risen 30% plus and there is no sign of the stock market running out of steam. Indeed, share prices have only kept pace with profits, and profits are still surging thanks to a growing population and surging oil revenues. Second, buy shares in Emaar Properties. Local real estate is booming, and if you can not afford to buy property then buying shares in the leading developer is the next best thing. The share price has doubled in the past year, but is only where analysts said it should be three years' ago; so plenty of room for further price gains to keep up with events. Thirdly, buy a small flat in the UAE on an 80% mortgage and let it out for an 8% yield. Given that local property prices are rising at 10% per annum and interest rates are 6.5%, then the investment case for UAE real estate is excellent, especially if you live on the spot and can handle the rentals yourself, or with the help of an agent. Of course, in the investment universe nobody can promise you a totally risk-free outlook. Anyone living in the Middle East is familiar with geo-political risk, although the UAE has been a remarkably steady and safe place since its formation in 1971. The main downside risk is a sudden plunge in oil prices. This would only happen if the world dropped into a major recession. Then cash or gold would be king. On balance, the UAE looks about as good as investment options come these days.