Swiss private bank Julius Baer spoke to journalists in Dubai this morning. The bank is mainly sat in cash these days but is poised to switch into equities and gold if the global economic environment changes towards inflation.
‘At the moment there is even some deflation,’ commented VIP visitor Remy Bersier, a member of the executive board. ‘Then again you can see inflation too, there is a lot of cash sat on the sidelines waiting for a signal that inflation is moving up’.
Huge cash position
He said ‘a huge proportion’ of Swiss Baer client assets is in cash at present. However the bank has already raised its traditional three to five per cent gold allocation in portfolios to 10 per cent and could raise that to 15 per cent if circumstances change.
‘With all the money printing going on in the world inflation is always a risk,’ he said. ‘People lose money on bonds with inflation while equities usually gain’.
These are exceptionally difficult times for Swiss Baer clients with fixed income returns of around 1.8 per cent on Swiss francs and negative returns of five to 10 per cent on blue chip equities. However, the bank is still expanding its presence in the Middle East.
New office space has just been procured in the Dubai International Financial Centre and the staff headcount is rising at a time when many locally based financial institutions are laying staff off. Has there been a flight to the quality of Swiss banks since the global economic crisis of 2008?
‘Yes we have benefited from that,’ admits Mr Bersier. ‘Our net new money inflow is growing by our target of four to six per cent a year. Emerging markets like the UAE continue to grow by far more than the US or Europe and that makes them attractive to us for expansion.’
Recovery prospects
Yet how confident could this Swiss bank be about the global recovery? Mr Bersier made the observation ‘you could say that from the Second World War until 2010 we have had a world economy with leverage and now we are going into a period of debt reduction.
‘That means a lower value for equity and higher unemployment which will hit purchasing power… At the same time there are elections in the US next year and we would hope for some stabilization in Europe… We can also see the population growing and higher growth in places like India, Vietnam and African states’.
Thankfully the UAE and the other oil states of the Middle East are also on that list.
-- Posted Wednesday, 23 November 2011 | Digg This Article | Source: GoldSeek.com
comments powered by DisqusPrevious Articles by Peter Cooper About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
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