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GCC market slump: Investors lose billions

Dubai Regional markets were very mixed during March with half the markets monitored ending in the red after a positive February. The telecom sector witnessed exciting developments and has kept everyone on the edge with regional companies making fresh investments in other markets.

The Dubai Financial Market (DFM) abruptly ended its reasonable start to 2007 with the index closing almost 11 per cent lower for the month. The market was weak throughout the month and witnessed one-way downward movement with the exception of a small rally towards the end of the month.

Significant developments at Emaar related to their dividend policy and transaction with Dubai Holdings seemed to take investors by surprise and was not well-received by the market which continues to be dominated by speculators and short-term traders thus leading to exaggerated reactions.

The public listing of the DFM, the first Islamic stock market, during the first week March and the announcement of the Emirates Bank International & National Bank of Dubai merger only had a brief and temporary positive impact on the market.

Air Arabia, the first state-owned airline to go public, completed its Dh 2.65 billion IPO during the month and exposed the shallowness of market liquidity.

The Dubai market sank into depression due to the negative sentiment generated by developments at Emaar amongst the investor community.

The Abu Dhabi Securities Market (ADSM) could not avoid the negative sentiment from Dubai, but in losing 6.70 per cent during the month, performed relatively well. The excitement surrounding the announcement of 40 per cent foreign ownership in Al Dar Properties shares and 20 per cent foreign ownership in Sorouh Real Estate shares ended quickly and these stocks faced selling pressure before recovering during the last trading week of the month.

Saudi Arabia reversed trends in the latter half of the month to lose half of its February gains.

Morocco added to its gains of the previous months to be the best performing market of the region with 20.2 per cent return YTD while the other North African markets of Tunis and Egypt continued to outperform their larger GCC peers.

Kuwait was the second best performing market over the month and is now the only GCC market with a positive YTD return, while the Qatari market continues to suffer from a shortage of liquidity despite valuations having reached attractive levels after its 2007 losses reached 15 per cent.

The Saudi Tadawul Index closed at 7,666.1 or 8.5 per cent lower than the previous month. The February rally extended to the first half of the month before the market suffered strong profit-taking and lost all its YTD gains. Importantly, trading volumes showed a clear improvement and the SR 20 billion average daily trading volume was one of the best since September 2006.

These large volumes were concentrated in the services and agricultural sectors whose 85 per cent share of the trading volumes is a clear sign that this market remains in the grip of speculators.
 

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