KUWAIT CITY, March 6: “We have come through the severe phase of the euro crisis and industrialised countries are now on a necessary path of consolidation”, stated Ulrich Kater, DekaBank Chief Economist as he praised the extensive reform efforts made by the European crisis countries. He added, “We are of the opinion that things have stabilized in the last year. This is astonishing as we had severe fears about the currency’s break up. But, on the contrary, this lead to results last year with support of the European Central Bank. European politics made a new commitment to the Euro. The northern and southern countries entered into a compromise with the southern countries agreeing that reforms and adjustments were needed in their economic systems and the northern countries being able and willing to sponsor and support the process until it becomes effective.”

Outlook
Officials from DekaBank visited Abu Dhabi and Kuwait City to make presentations under the title “Is Europe out of the woods?” to potential institutional investors, providing them with information on the current economic situation and future outlook in Europe, as well as investment opportunities in the German and global real estate markets. Oliver Behrens, Deputy Chairman of the DekaBank Board of Management, discussed DekaBank’s 60 years of experience in asset management and its pioneering role in this area in Germany, adding, “DekaBank is an institution with a stable ownership structure and close ties with both business and the public policy sector. We would like to make this extensive experience available to our clients to support them in their investment decisions In the next three weeks we will publish our results which exceeds 500 million net profit for the year 2012. We have increased the volume from this region investing into Europe rughly around 25 percent.”

Although the high volatility in financial markets in recent years has led to great uncertainty among investors, Kater pointed out that interest rates for secure investments, such as bank deposits and government bonds from ‘safe’ countries remained below the rate of inflation, which leaves investors in these products in a trap with regard to real interest rates.
Only real assets, such as stocks, corporate bonds, commodities and real estate, he stressed, can promise returns higher than the inflation rate. “Still, investors should observe a number of rules; specifically, broad international diversification, regular portfolio monitoring, continuous investing and a long-term investment horizon. Custom-tailored products and professional risk management will therefore be more important than ever for the foreseeable future”, said Kater.
However, the Eurozone still faces great challenges in coming months such as bank restructuring in Spain, a potential haircut in Cyprus, and the uncertainty about the direction of reforms following the Italian election stalemate.

Speaking on the impending investigations on Cypriot institutions that will determine the outcome of the financial bailout, Behrens said, “We believe that the investigation will take time and will come out only after the German elections in September. After that, they will try to move the banks under European supervision which will serve as an example and give the rest a clear picture of what supervision entails.”
Addressing the wide disparities in the labour market, Kater said, “We have a split labour market, we have very healthy labour in the northern part of the Eurozone. For example has only half of it’s unemployment rate since before the crisis.
Behrens commenting on the stark unemployment figures in countries like Spain and Greece, stated that the official rates did not reflect ground reality. If they did, Spain would be in the midst of severe social unrest. “Usually there is a black market for jobs which accounts for about fifty percent of those numbers”, he said.

Crisis
The biggest part of the crisis for Spain, he continued, was in the real estate portfolio of banks who had invested into Suburban properties and townships which were now empty. He however attested to an increased influx of Spanish graduates, particularly engineers, in to Germany which has corresponded to growth in its otherwise aging population.
Mark Wolter, Managing Director of WestInvest GmbH, a securities house for Sparkasse banks and full service provider for institutional investors, informed that as Europe is currently divided in terms of economic growth, economic developments remain significantly better in the northern part of the continent compared to the south. “For this reason, attractive new real estate investments are mainly found in Germany, Scandinavia, and Great Britain, primarily in London”, he said. He added that the financial and economic crisis has had relatively little effect on Germany since 2009, and the country is a safe harbour in the current turbulence evidenced by strong private consumption and low unemployment. He also highlighted that the German commercial real estate market had recorded only modest declines in leasing.

“German and foreign investors continue to be interested in investing in Germany. We have observed rent increases for office properties in the top 7 cities in Germany. Retail properties also showed rental rate increases for properties in prime locations due to high demand by international retail chains. This applies similarly to logistics sites, where e-commerce is the main driver of demand for suitable properties”, stated Wolter. DekaBank currently encompasses 450 real estate investments in 23 countries with a current total value of approximately EUR 25 billion.
The DekaBank Group has more than EUR 173 billion in assets under management, manages approximately five million securities accounts and has branches in Luxembourg and Switzerland, making it one of the largest asset managers in Germany. Close integration of core competences in asset, credit and risk management allows DekaBank to offer service covering all major asset management functions of portfolio management, fund administration, capital market expertise and comprehensive customer support.


By Cinatra Fernandes
Arab Times Staff