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Investors challenged despite UAE growth forecast
Certainly, growth is picking up between 3% and 3.2% in 2010. Oil is back to $90 per barrel. But a closer look at the year reveals how challenging 2010 has been to decision makers, workers and investors likewise.
In spring, the opening of new Metro stations were delayed, Iceland's volcano ashes led to the cancellation of Emirates and Etihad flights to Europe. Force majeure aside, Germany's Lufthansa relentlessly accused both UAE-carriers of being "subsidized" by the state. The tragic crash of a UPS-run transport -jumbo jet near the Dubai International Airport in September, which raised fears of an alleged bomb plot by Yemen-based terrorists in the usually secure emirate of Dubai, completed the bizarre picture.
In autumn, Canada eventually denied the UAE carriers permission to fly to Toronto daily, triggering a diplomatic row between the two countries. How quickly times change: It was only in January that Canada's new Ambassador to the UAE, Kenneth Lewis, celebrated together with Dubai's financial free zone DIFC the arrival for the first Canadian bank to the hub. Bankers who suddenly faced a BlackBerry blackout, added some sort of irony to the year.
UAE stock markets hit the bottom
Regarding the stock market, an old proverb says, that "you should not praise the day before dawn". However, for the Dubai Financial Market (DFM) it might be "Mission Impossible" to end the year with a small profit. The DFM General Index lost 8.86% (as of the close of trading on December 14), more than any other GCC bourse. Market indicators such as the shares of real estate developers Emaar Properties or port operator DP World recovered, but failed to crack resistance levels at Dhs4 and $0.60 respectively. The ADX exchange's main index in Abu Dhabi still struggles to break even. Trading volumes dipped 60%, forcing dozens of brokers to quit business.
The market in Qatar, on the other hand, is riding on the enthusiasm of record-high liquefied natural gas (LNG) exports and the gain of the FIFA World Cup it was granted for 2022. Year-to-date, the QE Index surged over 26%, but this is still less than the Tehran Stock Exchange (up 64%). "Investment managers will need to become astute political analysts as governments increasingly drive the financial market agenda", says Guy Monson, Chairman of the Investment Policy Committee at Bank Sarasin.
As if the recovery is not tricky enough, the fourth round of UN sanctions against Iran has led to a decline in trade of over 50% between Dubai and the Islamic Republic, according to the Iranian Business Council. But: "The UAE will always trade with Iran", UAE Minister of Economy H. E. Sultan Al-Mansouri told AMEinfo.com at the sidelines of the World Economic Forum on the Global Agenda which took place in Dubai from November 29 till December 1st.
As January goes so goes the year, is another traders' bon-mot. For Dubai it would be true to add that "December mirrors the last twelve months". Axiom Telecom cancels its long-awaited IPO at the Nasdaq Dubai. Sean Penn cancels his coming to the 7th Dubai Film Festival.
Nevertheless there are also sign of hope across the UAE. In Ras al-Khaimah, RAK Airways relaunched regular flights on October 10 2010. Fujairah will invest Dhs4bn in order to double its port capacity, the UAE's only access to the Indian Ocean. The Dubai World debt plan was approved by 99% creditors on September 10. Standard Chartered Bank believes that Dubai can meet $18bn of debt which is due in 2011. Dubai's international airport, which celebrated its 50th anniversary on October 29, heads towards 46 million passengers per annum. And Abu Dhabi opened the world's first Ferrari theme park. During challenging times like these, green shoots such as these sow the seeds for the coming boom.
Gérard Al-Fil, Financial Journalist
