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Foreign residents in the United Arab Emirates (UAE) are set to enjoy more accessible and efficient travel to Europe, thanks to shorter Schengen visa processing times and reduced airfares. In a positive development, recent data from Invesco indicates that despite the typical year-end slowdown, fixed-income exchange-traded funds (ETFs) experienced a robust December, attracting net inflows of $5.1 billion. This solid performance concluded a remarkable year for the sector, with fixed-income ETFs accumulating a record-breaking $68.2 billion in net new assets (NNA) in 2023, marking the highest figure ever recorded.
Throughout 2023, investor demand was particularly focused on higher-quality fixed income, driven by attractive yields that mitigated the necessity to take on additional credit risk. With expectations of interest rate cuts in the next 12 months, 2024 is poised to witness a continuation of strong inflows into fixed-income ETFs. Paul Syms, Head of EMEA ETF Fixed Income and Commodity Product Management at Invesco, noted the significant rally in bond markets during December, providing positive returns across the fixed income spectrum. The Bloomberg Global Aggregate Index recorded its strongest two-month return in 30 years, with a 5.0% gain in November followed by 4.2% in December. This rally was fueled by weaker economic data and a more dovish outlook from the Federal Reserve, adjusting its rate expectations and inflation projections.
The positive turn in the bond market translated into favorable fixed-income returns for the entire 2023 calendar year. Various markets, including U.S. Treasuries and USD-denominated investment-grade credit, witnessed notable recoveries, concluding the year with substantial gains.
Looking ahead, fixed-income ETFs are expected to remain popular among investors seeking to secure longer-term yields before potential interest rate cuts. In 2023, leading categories for inflows included EUR government bonds, EUR and USD investment-grade credit, and fixed maturity bonds. Conversely, categories such as U.S. Treasuries, inflation-linked, and China bonds experienced outflows.
Despite the improved visa processing times for UAE residents planning European trips, authorities recommend early booking for visa processing appointments to avoid potential delays, especially during busy travel seasons. Monaz Billimoria, Regional Head at VFS Global, reported a 12% growth in visa applications in 2023 compared to 2019, with a remarkable 145% increase between 2021-23.
In addition to streamlined visa processes, airfares to various European cities have seen substantial reductions, providing more affordable options for UAE residents. Spain, Switzerland, Italy, France, and Germany are identified as the main destinations for UAE travelers in April. In 2023, travel demand to Europe surged by 40-50%, surpassing 2019 levels.
Daniel Rosado, Director of the Spanish Tourism Office in Abu Dhabi, highlighted the growth in demand for Spain, citing increased projected seats, searches, and airline bookings. Notably, airlines are displaying strong competitiveness for major routes, offering more economical options for travelers. For instance, economy fares for the Dubai-Paris route between January 10 and January 24 vary from €131 by Wizz Air to €248 by Emirates, demonstrating increased competition and making European travel more accessible for UAE residents.
By fLEXI tEAM
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