'Exchange traded funds best option for investors'
BY SANDHYA D'MELLO

20 November 2004

DUBAI - Investors in secondary stock markets are averse to risk in the Middle East and need to hedge their risk. Various trading instruments are emerging in the already volatile financial markets. In an exclusive interview with Khaleej Times, Kishore M, managing director, Powerup Capital, explains how investors can explore trading options in the region.

Question: How do u perceive the present investors in Middle East and how do u propose to break the conventional investor mindset?

Answer: The present investors in Middle East are mainly investing through Unit Trust or Mutual Fund Manager. A small fraction is trading directly with the stocks and currency. The investors in Middle East have burnt themselves in the stock markets by either investing money themselves in IPO or secondary market and hence are risk averse and looking for alternative investment products. We educate the investors by teaching them to invest in ETF (Exchange Traded Funds) which is buying a basket of stocks rather a single company. ETF has done very well in the US and is started to gain some interest in the Asian market. We also educate investors who want to invest in company shares to hedge their exposure through Futures & Options.

Q: How do u view the current financial market developments in the Middle East?

A: The Middle East market is at its nascent stage. The visibility is low, the volatility is high and the liquidity is in selected counters. However, there is a very high potential since a growing number of people are interested to invest in the market.

Q: What prospects do ETFs, Futures & Options have in this region and how would investors benefit?

A: ETF would be an excellent vehicle for the first time investor who would be interested to enter the stock market but has no knowledge to trade shares. Unlike owning company shares which can be risky, ETF gives you exposure to the whole market and not just one share. So the risk element is low. Also over a period of time stock market goes up — hence ETF would go up. The other advantage is you get dividends. Futures & Options will help investors to hedge their positions in the event the market goes down.

Q: What are the future plans of Power UP in Middle East, along with its existing operations worldwide?

A: Powerup has opened an office in Knowledge Village and plans to make Dubai its headquarters. It has operations in Singapore, Malaysia, Indonesia, Philippines and Hong Kong. It plans to offer alternative investment learning systems products to investors and corporates and will go for an IPO in the near future.

Q: How do u propose to establish the Futures and Options as trading instrument in the Middle East?

A: Currently we are raising a lot of awareness of these instrument through our training programmes and seminars. We have already trained more than 150 serious investors and conducted seminar with over 1000 attendees in the Middle East. We will soon have our Futures & Options trading operations once we launch our Hedge Fund.

 

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