Investment options for 2004

Let's start with the reverse question: where not to put it? Cash deposits, particularly in US dollars or dirhams are not the place to keep money in 2004. Interest rates are very low, the US dollar is depreciating rapidly and inflation looks likely to pick up later in the year.

Buy US equities? The same problem applies. US dollar devaluation may erode what little upside is left in the US equity market. Besides a sudden devaluation of the US dollar would crash the equity market, so this is not the safest place to be in 2004.

No, the answer for Gulf investors is to think local. Buy a UAE mutual fund as UAE stocks have not yet enjoyed the boom in prices seen in Saudi Arabia and Kuwait this year, although the business fundamentals are stronger.

Longer term investors should be buying Dubai freehold property, and in Doha when it starts selling freehold next year. Rental yields in Dubai are very attractive at 7-10%, and the market should get a boost from a new federal real estate law in 2004 and the opening up of the local mortgage market, bringing down the cost of finance.

Underpinning both UAE equities and Dubai real estate is the Government led investment boom. No other small country in the world is investing $30-40 billion over a two to three year time horizon. It makes sense for the investors to follow behind this massive statement of confidence in the future.

Often in life the best opportunities are right under your nose. Such is the case now in the Gulf region. It is not necessary to trust emissaries from distant foreign capital markets with your money. Local shares and bricks-and-mortar are the best options for 2004.

Stand back while the overvalued euro destroys the European recovery. Laugh at Americans who see asset prices rise while failing to notice that their currency is vanishing down the drain. See the UK property market start to falter. Instead buy into an emerging economy that is firing on all cylinders. Happy New Year!