The UAE's Indian workforce was getting great value for the remittance payments this weekend thanks to plunging rupee rates.
One US dollar is currently valued at about 74 Indian rupees - in January the exchange rate was closer to 63 rupees. On Saturday, the rupee was trading at 20.028 to the dirham.
Indian workers earning dirhams, pegged to the US dollar, are benefiting from the boom after officials in Delhi made the unexpected decision to freeze central bank interest rates.
That followed consecutive hikes in the summer from 6 per cent to 6.25 per cent and again to the current level of 6.5 per cent.
Along with sending money home, financially savvy residents have withdrawn cash to stockpile with the intention of selling it back to trading houses when the rate rises, according to Akhil Harshan, a branch supervisor at UAE Exchange in Abu Dhabi.
“The currency rate has been continuing to fall, and although the weekend has been slow generally, we have seen an increase in demand for money transfers for Indian rupees,” he said.
“People are taking the opportunity to help their families back home or just to send money there to top up their savings.
“Most of the business we are seeing is transfers from dirhams to rupees but we are also seeing an interest from customers to take out larger volumes of currency than we would usually expect.”
The value of the money they send home has increased by around 10 per cent since the start of 2018, as the Indian rupee remains the worst performer of Asian currencies this year.
A similar slump in the peso and euro in the past 12 months has resulted in workers based in the UAE cashing in with similar style by sending home a larger remittance than usual.
“We had a similar demand earlier this year for euros, and it is not an uncommon trend when we see big moves in the market,” Mr Harshan said.
“Remittance is a big part of living here for many, so it is not unexpected to see an increase in volume when there are preferable rates.
“Occasionally we have to get more currency in, but most of the transactions are being transferred online.”
While a dip in the value of rupees may be good news for workers in the UAE, some are concerned about the soaring cost of living back home - which the summer interest rate hikes were meant to curb.
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Read more on the remittance rush:
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Blockchain will put an end to costly remittance charges, Abu Dhabi financier predicts
UAE's Filipinos cash in with best exchange rates for a decade
Residents cash in as tumbling euro and rupee sparks buying boost
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It is almost two years since India was plunged into a cash crisis when Prime Minister Narendra Modi invalidated 86 per cent of India’s currency by banning high-denomination currency notes.
The 500 rupees (Dh24.85) and 1,000 rupees (Dh49.70) were the highest value currencies withdrawn by the government to try and wrestle back control of black market cash and crack-down on corruption.
The result was an economic slide in which millions working in cash in hand jobs went unpaid, though personal income tax collections increased by 27 per cent in the year after the move.
Rising oil prices are also contributing to the weakening of the currency.
To arrest its currency slide, the Indian government has since stepped in to raise taxes on 19 non-essential imports, such as fridges and shoes.
Saanvi works in a department store in Abu Dhabi Marina Mall and sends money back to her two sisters and elderly mother in Kolkata when she can.
She is planning to send an extra Dh300 back this month, because of the preferential exchange rates.
“I don’t earn a great deal, but I send back what I can,” she said.
“Every little helps, but these kind of rate changes usually means life is getting more expensive for my family back home, so it evens out.”
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How to keep control of your emotions
If your investment decisions are being dictated by emotions such as fear, greed, hope, frustration and boredom, it is time for a rethink, Chris Beauchamp, chief market analyst at online trading platform IG, says.
Greed
Greedy investors trade beyond their means, open more positions than usual or hold on to positions too long to chase an even greater gain. “All too often, they incur a heavy loss and may even wipe out the profit already made.
Tip: Ignore the short-term hype, noise and froth and invest for the long-term plan, based on sound fundamentals.
Fear
The risk of making a loss can cloud decision-making. “This can cause you to close out a position too early, or miss out on a profit by being too afraid to open a trade,” he says.
Tip: Start with a plan, and stick to it. For added security, consider placing stops to reduce any losses and limits to lock in profits.
Hope
While all traders need hope to start trading, excessive optimism can backfire. Too many traders hold on to a losing trade because they believe that it will reverse its trend and become profitable.
Tip: Set realistic goals. Be happy with what you have earned, rather than frustrated by what you could have earned.
Frustration
Traders can get annoyed when the markets have behaved in unexpected ways and generates losses or fails to deliver anticipated gains.
Tip: Accept in advance that asset price movements are completely unpredictable and you will suffer losses at some point. These can be managed, say, by attaching stops and limits to your trades.
Boredom
Too many investors buy and sell because they want something to do. They are trading as entertainment, rather than in the hope of making money. As well as making bad decisions, the extra dealing charges eat into returns.
Tip: Open an online demo account and get your thrills without risking real money.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
