After the Office for National Statistics revealed the UK’s debt-to-GDP ratio has surpassed 100% for the first time since 1961, fixed income ETF provider Tabula Investment Management Limited says investors should consider investing in the Gulf Cooperation Council (GCC) countries.
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Michael John Lytle CEO of Tabula Investment Management
The UK’s debt problems are dwarfed by those of Italy which has over has over EUR2.6 trillion of debt representing 145% of its GDP.
Meanwhile France’s debt-to-GDP ratio is predicted to reach 115% by the end of the year. The debt challenge is similar in Germany where the debt-to-GDP ratio is projected to increase to around 70% in 2023.
This mountain of debt weighing on developed Europe makes GCC countries, which comprise Saudi Arabia; UAE; Qatar; Kuwait; Oman; and Bahrain, look increasingly attractive to fixed income investors. The IMF reports UAE’s debt-to-GDP ratio as just 31%, while Saudia Arabia’s debt-to GDP-ratio is not expected to pass 25% this year.
Tabula, which was the first asset manager to launch a GCC government bond ETF earlier this year, says the region looks even more appealing next to its developed counterparts when considering inflation.
The UK’s current inflation rate is 8.7%, in Italy it is 7.6% and in Germany 6.4%, while the GCC has kept price increases at around 3% this year.
In terms of performance, GCC government bonds have outperformed the JP Morgan Emerging Markets Global Core Index by over 5% every year for the past five years.
Jason Smith, Chief Investment Officer at Tabula, said: “GCC countries have an incredible growth story to tell, and this is not just about oil production. The GCC economies are also growing through other avenues such as tourism, while tax reform has also helped drive revenue.”
Tabula CEO Michael John Lytle said: “Investors need better tools to extract value from their fixed income positions. GCC countries are a particularly interesting segment of the emerging markets, offering long-term growth and diversification from debt-laden developed economies. Traditionally it has been difficult for investors to access these markets, which is why Tabula is pioneering ETFs in the GCC region.”
Source : ETFWorld.co.uk
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