Better times ahead for Middle East markets?

That foreign participants have been the main drivers of the recent UAE stock market rally was only too evident from a glance around the 160 delegates at the MEED Capital Markets 2007 conference in Dubai. All but a handful were not GCC nationals.

However, the conference was assured by local brokers that the wave of buying from foreign institutions has now been joined by renewed interest from local retail investors and big families.

This is a welcome mood in which to launch the landmark $4.2bn DP World IPO, which inevitably became the main talking point of the conference.

DP World IPO

Deutsche Bank CEO Henry Azzam said: 'The future is bright, there is unmatched prosperity in the region, the new equity culture is becoming more entrenched and the macro economic outlook for the stock market is very good with oil prices approaching $100.'

In typically robust style he went on to list 10 points contrasting the old and new equity culture: ranging from a shift to institutional investors to wide-spread market reforms and increasingly sophisticated investment options.

Against this background Azzam thought the recently announced DP World IPO would be the start of a shift towards a dominant regional stock market based in Dubai, the renamed Nasdaq-DIFX.

All the same Azzam did also note the 80 per cent correlation between the oil price and the Gulf stock markets. In short, if oil heads down in price, stock markets will drop too.

Credit crunch

With the US sub-prime credit crunch now causing waves in the global banking industry - with the CEOs of Merrill Lynch and Citi resigning in the past week, and tens of billions in banking write-downs in prospect - the worry behind the scenes at the conference was that this would now spread to the world economy, and bring oil prices thumping down, as happened in 1999 with the Asian Financial Crisis.

Then the small shoots of recovery seen in some markets - and the continued roll of IPOs which is expected to hit $10bn this year, including DP World - may quickly shift back to a search for a new market bottom.

One delegate from Kuwait said he thought it was 'just too soon' to expect markets to recover from the recent crash, although the Kuwait market has done better than most this year.

Nevertheless, the Saudi market is still struggling to recover from its crash from over 20,000 to less than 8,000, and the region's biggest bourse remains flat on its back.

Perhaps when the event convenes again next year the outlook will be clearer, and by then the clouds on the global economic horizon will have gone - or maybe not.

See also:
UAE banking sector strong, says IMF
DP World IPO will be the making of the DIFX
Dubai strikes win-win deal with OMX and Nasdaq