Expats rejoice as Indian rupee plummets

Updated 03 June 2013

Expats rejoice as Indian rupee plummets

The Indian rupee dropped to its lowest level in 10 months and one Saudi riyal was fetching almost Rs. 15 yesterday. "My remittance fetches more rupees now." This is how the average Indian expatriate is reacting to the situation.
However, some Indian expatriates felt the falling trend of the rupee will have an adverse impact on their national economy in the long term.
"Yes, in the short term we are gaining here because our Saudi riyals are fetching more Indian rupees. No doubt about it, but it will have a very negative impact on the Indian economy. So in the long term we'll suffer there in India," A. Kadir Khan, who is living in the Kingdom for over 20 years, said.
The partially convertible rupee closed at 56.17/18 per dollar compared to 55.9550/9650 on Tuesday. The unit fell to as much as 56.37, its lowest since July 25, 2012.
"This has come in as good news to me because I have been wanting to remit a substantial amount to India," said Zabihuddin Akhtar, an accountant. "This will fetch me a good rate."
Akhtar knows full well that a depressed rupee is not good for the Indian economy. "But I am thinking of what is beneficial to me at this moment," he said. "At a time when our salaries have remained stagnant, such fluctuations are like artificial bonuses for us non-resident Indians."
John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, said the dollar has entered bullish territory and from here on it will appreciate against most currencies.
"For Saudis and expatriates it translates into more purchasing power abroad or when they remit and hopefully cheaper imports or at least not a spike in imported goods over a period of time. This should also be reflected in the rest of the GCC as the dollar forms the bulk of cross border transactions," he said.
Jarmo T. Kotilaine, a regional analyst, told Arab News: "The global economy still faces numerous risks and currency dynamics can be subject to significant short-term influences. Even though many emerging Asian currencies are likely to continue to appreciate over the coming years, this trend may be contained or even reversed by current positive momentum of the dollar."
However, he said the greenback is benefiting from growing signs of what looks like a fairly sustainable — albeit perhaps not very impressive — recovery. This is fueling speculation of exit strategies from the current quantitative easing strategies of the Fed. Even if any actual change will likely prove extremely gradual, this prospect is likely to continue to influence expectations in a way that is favorable to the dollar. By contrast, for instance, India has been loosening its monetary policy and is yet to regain its previous growth momentum.
Recent years have shown that exchange rate fluctuations can have a significant impact on remittances, most notable in terms of their timing.
"With time, the continued appreciation of Asian currencies will likely begin to put pressure on expatriate salary expectations by potentially reducing the number of people willing to come and work in the Gulf. Higher living costs in the Gulf will have the same effect. This should over time reduce the gap between expatriate and local salary expectations in a way that should favor more local employment," Kotilaine added.
He said a degree of volatility between the riyal and many Asian currencies is the result of exchange rate policies based on a free or managed float in many Asian economies. "People with an element of discretion in terms of the timing of remittances tend to increase them when the Asian currencies depreciate as this increases the purchasing power of the transfers in their home countries. Under the opposite scenario, there is a greater likelihood of retaining funds longer in the Gulf in the expectation of a more favorable rate in the future."
The rupee has so far in 2013 failed to benefit much from the nearly $ 20 billion worth of inflows into equities and debt, according to Reuters.
The index of the dollar against six major currencies was down 0.6 percent when the rupee closed.
In the offshore non-deliverable forward PNDF, the one-month contract was at 56.53 while the three-month was at 57.11.
In the currency futures market INRFUTURES, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 56.47 with a total traded volume of $ 5.50 billion, Reuters reported.

Wealthy Gulf individuals feel more confident about regional prospects

Updated 51 min 43 sec ago

Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.