Good investments in uncertain times

These are very uncertain times for Middle East investors. Global equity markets are under pressure again, for a third year in a row. The US dollar is sliding and threatens to precipitate an economic crisis. And property prices in the UK and USA may have peaked.

It is no wonder that the gold price is back to $325 an ounce, and that gold shares are up 20-60% so far this year. Financial markets hate uncertainty and gold is a traditional safe haven. And if equity markets were to undergo a sharp revaluation this autumn, i.e. a collapse, then the gold price would head in the opposite direction.

GCC stock markets are harder to predict. In a big global equity sell-off, the Gulf bourses might take a setback too. But price-to-earnings ratios are still not that high and, in the absence of alternative investment opportunities, Gulf bourses could still head higher. After all, the profits outlook for local companies is good with oil prices at present levels.

Property also looks a safe option, with interesting new opportunities beginning to emerge in Dubai for bolder investors. This autumn the Palm Island and Emaar Properties will offer more freehold apartments and villas for sale. With 25-year mortgages readily available and 10% deposits, these properties look exceptionally good investments, both to expatriates who want to save their rent and for those seeking longer term capital appreciation.

As the City of Gold this really could be Dubai's year with gold and property standing out as the best investment opportunities. And for those who do not fancy physical ownership of these assets, the shares in the companies that supply them are a logical alternative.

Emaar Properties, with its shares at a one-third discount to net asset value, remains an outstanding buy that will probably only really shine when profits are declared for 2002 and investors think seriously about cash flow over the next few years. Newmont Mining is the world's biggest gold mine owner, with arguably the best management in the business, and would be a typical pick for gold share exposure.

Meanwhile, with the US dollar under pressure those revamping their portfolios this summer might consider some exposure to euro assets, or just a euro bank account. But beware of euro mutual funds which will take a battering if global equity markets get in more of a fix this autumn.