Volatility in Gulf's markets

The oil-rich states in the Middle East might be experiencing impressive corporate growth and high profits thanks in part to the rise in the price of oil.

by The Economist 20 May
Last Updated: 23 Jul 2013

However, their financial markets have been shedding value. Saudi Arabia’s stock exchange, for instance, lost a fifth of its worth on 11 May. The roller coaster ride being experienced by investors in the region is caused by the market’s immaturity and not because there is too much cash in the system.

Regulators have not enforced disclosure enough and a flood of small investors have overtaken more cautious big investors. The resulting volatility and exuberance has led to over-valuations and subsequent sharp dips in share price.

For example, Dubai-based property developer Emaar was valued at $45bn recently, even though many of its projects have not yet been built. Later, this figure fell to $18bn. In spite of this market volatility, the long-term picture looks bright.

If oil prices remain high and if the region’s markets and regulatory environment matures as expected, then there is every reason to assume the local economies will achieve sustained growth. By 2030, one economist suggests, the Gulf region will constitute the world’s sixth-largest economy.

Source: Ups and downs – Arab investors’ roller-coaster ride
The Economist, 20 May 2006
Review by Morice Mendoza


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