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They said what?

They said <em>what</em>?

It’ll be a great year for investing in Gulf stocks, these experts told us. Sucks for you if you listened.

September 17, 2008 2:05 by

Scott MacMillan

A wave of panic selling struck Gulf bourses this week in the wake of worsening financial turmoil in the US, sending stock prices plummeting further. Dubai’s bourse is now down almost 36 percent from its peak in January, when many analysts said it was a great time to buy. Other regional stock exchanges have performed similarly or worse over the course of 2008.

Hold on. Wasn’t the region supposed to a haven of strong performance amidst a global meltdown?

Apparently not. The markets have paid little attention to boosterism of pundits and analysts who, early this year and in late 2007, predicted a bumper year for local equities.

The gullible among us are still waiting for the big surge in prices that was promised at the start of this year.

Here’s what some of these “experts” said at the start of 2008:
“You probably will see a good year for investing equities in the UAE no matter what happens in the US,” Abdul Kadir, CEO of Mashreq Capital, told 7 Days on Jan 10.

Hm. Then again, maybe not.

The surge of stocks in the fourth quarter of last year would continue, Emirates Business told us on Dec. 29. “With bumper earnings anticipated for this year, there is little to disrupt the rosy outlook,” the government-owned daily wrote.

The paper supported its prediction with a quote from Mohammed Ali Yasin, managing director of Emirates Securities: “Next year will be a very positive year for the equity markets.”


Rayan Salam, portfolio manager at Algebra Capital, said UAE markets “are only at the beginning of an uptrend.” Actually, that uptrend ended less than a month later, when the Dubai Financial Market’s main index peaked for the year at 6,291 before quickly dropping again, then trading sideways between about 5,300 and 5,800 for most of the year, and falling again precipitously since the start of August.

So forget about the “bull run” promised by analysts. The September-to-September chart (seen here on Zawya) now resembles a lumpy heap of bullpucky.

The markets’ performance have lent little credence to the theory of “de-coupling,” which said that robust regions like the Gulf would remain immune from the US contagion.

Regional investment house Shuaa Capital also appears guilty of misplaced optimism, predicting a sustained boom in 2008 that would see a 30 percent overall gain, as was Nomura – even though the Japanese bank admitted there were “few bargains” on UAE bourses.

Oddly, so-called experts’ failure to predict the markets’ movement hasn’t stopped the relentless hype. Again in Emirates Business, we’re told in a headline on Monday: “The time is just perfect to buy UAE bank stocks.” Just perfect.

The writer argues that UAE stock market investors have “overdone their pessimism over the summer – just as they did last year.”

They were overly pessimistic this year and overly pessimistic last year, the argument seems to go, but one of these days, those pesky markets will come to their senses.

Maybe so. The markets might yet stage a remarkable recovery that would see it jump past the peak levels seen around the New Year. But at this point, one could hardly blame readers – and investors – for turning a deaf ear to such predictions.

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