No sign of panic selling as war looms

Stock markets in the GCC have been deadly quiet over the past week as the new deadline of March 17 for Iraqi compliance with the UN's disarmament resolution draws closer.

In the UAE markets only the Emaar Properties counter attracted any movement, with shares down by Dhs1 to Dhs21.80. Here a few small investors appear worried by plans to build the world's tallest building in Dubai, and its possible impact on dividends.

However, this unfounded short term worry about the cash flow implications of this new project ignores the huge cash flow to come from the rentals once this building is let. Meantime, Emaar Properties has clearly taken this building's cost into its profit projections for 2003 and 2004 which show an impressive rise to come with room for higher dividends.

Emaar is by far the cheapest share in the GCC by price-to-book ratio, and holds a key position in the dynamic Dubai economy, not least because of its excellent land bank. Its business stands to benefit considerably from a post-Iraq crisis boom in the Middle East, and this is one of only three shares that foreign investors can buy in the UAE.

But investors across the GCC are now biding their time and waiting for the war clouds hanging over Iraq to clear. Once this uncertainty is removed, and the outlook for oil prices is decided, then investors will make their move.

At present they are confident enough to do nothing and sit on the sidelines, but not confident enough to plunge back into local markets. When they do we can expect to see a surge in GCC share prices which are still cheap by world standards at a time when the rest of the world is short of better investment options.