Two years ago, I was making a lot of money very fast. I learned quickly and it was better than any job I had ever done before - I was making good money in my free time, and what is better than that?" exclaims Hassan Alalkeem, emphasising every other word with the shake of a fist.
"The one thing I did not learn, the thing that I did not see coming, is that everybody would begin to lose so much, so quickly."
It has been a bad twelve months for Hassan. Sitting hunched over a coffee in the bowels of the Dubai Financial Market (DFM), the 37 year-old Jordanian reflects on a period during which hundreds of thousands of dollars have been wiped out from his once-robust share portfolio.
He is not alone. UAE stocks lost US$7.5bn, or 5.3%, in market capitalisation in just the first quarter of this year. The DFM's capitalisation fell by US$5bn, while Abu Dhabi Securities Market lost US$2.5bn - this despite companies handing out cash and share dividends worth US$5bn.
The figures are just the latest in a series of sobering statistics. A flick through the indices of any Gulf market over the last twelve months makes for deflating reading, as relative stability in Bahrain, Kuwait and Oman is offset by crippling losses in Qatar, Saudi Arabia, and the UAE.
So what are the alternatives for local investors? Their own markets are trapped in a downward spiral that has left thousands across the region with portfolios worth a fraction of their value during the heady days of 2005. Should they be looking elsewhere to recoup that loss, or is there cause for optimism that the Gulf's bourses might recover some of their former glories?
Some analysts suggest that the slide is slowing, pointing to this time last year, when in the first quarter of 2006, market capitalisation fell by 15.2% or US$32bn. At the same time, US$4.5bn worth of dividends were initially recorded.
Unfortunately, others suggest that there could be even worse to come. Last week, Swiss bank Julius Baer warned DFM investors that stocks could fall another 1000 points before hitting bottom. "Even now a 300% increase in three years is too much too soon," regional investment research head, Dr. Venkatraman Anantha-Nageswaran, predicted.
"A major correction was in order, related to underlying asset price inflation stemming out of the property market," David Butter, the Economist Intelligence Unit's (EIU) Senior Middle East economist, tells Arabian Business. "However, what happened last year perhaps didn't go quite far enough in terms of the adjustment that the market needed."
Bearing this uncertainty in mind, there are alternatives for local investors wishing to sail in relatively safer waters.
The Dubai International Financial Exchange (DIFX), for instance, only allows offshore companies to list - allowing Middle East investors the opportunity to play the markets without pinning their hopes on the fortunes of Middle East companies. "The local markets cater for local investors and for local companies that want to list, but we are very different from the local exchanges," Per Larsson, CEO of DIFX, tells Arabian Business.
"We target not only retail investors, but also institutional investors, hedge funds and both local and international investors," he continues. "The logic behind the DIFX is to serve the entire region - we operate in a very different environment to the local exchanges, we are set apart from those other exchanges, and so we complement them very well."
Nevertheless, the DIFX's parent, the Dubai International Financial Centre (DIFC), is already looking further afield. It is in talks with the London Stock Exchange (LSE) over developing a series of joint operations, including the cross-listing of shares and pipes allowing London investors to gain entry into the Gulf markets, and vice versa.
A pact between the LSE and Dubai would be particularly significant because it would put London in pole position for secondary listings of Dubai companies that are expected to list over the next 18 months. Such companies include DP World, Emirates Airline, and the Jumeirah hotels and leisure group.
Meanwhile, the region's investors would be guaranteed unfettered access to London's substantial, and significantly more mature, stock options.
Even further away from home, one US firm is offering disgruntled local investors an online route out of the Middle East mire. Financial services giant E*Trade Financial recently opened its first office in the Middle East. From its Dubai hub, the company will operate as an online discount stock brokerage, offering self-directed investors the prime opportunity to invest on the US stock exchange.
"We are providing the local market with access to the US stock market, and we believe this is very important, because as investors become more sophisticated, they want more diversification," says Mathias Helleu, Executive Vice President of E*Trade's international operations.
"The US market is the largest market in the world, the most liquid, the most transparent, and it provides an interesting alternative to the local markets," he continues. "People here in the Middle East can go directly to the US, open an account, and access the US market."
Helleu argues that E*Trade offers the unique combination of a competitive, advanced US platform, with a localised service tailored to Middle East investors.
"With respect to the local investors here, a lot of them will be accustomed to investing in the local market," he explains. "Yet a lot of them actually do have experience at the higher end, at the more sophisticated end of the market, and have been investing in the US for some time.
"The US market is extremely mature now, and more than 50% of people invest online, compared to the global average of around 15%," he continues. "We are just at the very beginning of something that's going to be very big."
He maintains that the US market is the market of choice worldwide for investors who are looking outside their own local markets, for alternative investment opportunities. "What we have found globally is that, whether you're in the Middle East, Asia or Europe, the US market is going to be the market you look at immediately after your local market," he insists. "Obviously you know your local market, as you know the names of the stocks, you know the companies," he continues. "But if you are in Germany, for instance, you might not know what is going on in France or the UK, but you know Microsoft - so you will want to invest in the US."
Helleu argues that with regards to long-term investment, the US has consistently offered positive returns.
Moreover, while going from the local market to the US is one diversification, there is then the potential for further elements of diversification within the US offering. Investment in foreign companies through ADRs (American Depository Receipts), and investment in ETFs (Exchange-Traded Funds) are among such options.
"It may start to kick in, that investors in the region feel safer investing in markets such as the US," admits the EIU's Butter. "There had to be a very big adjustment in mentalities and attitudes towards investment, after the more or less uninterrupted boom up until spring of last year, and now maybe people would be more inclined towards safer havens."
E*Trade, unsurprisingly, are even more bullish in their assessment of the UAE investor's appetite for the self-styled ‘Land of Opportunity'.
"There's no question that as the local markets over the past year or so have advanced, but now that the markets have corrected and pulled back as far as they have, that's why we think the timing is perfect for us to enter this market," emphasises Mikaal Abdulla, E*Trade's General Manager Middle East, and Group Vice President responsible for Strategy & Business Development in Europe and Asia.
"We want to give people access to the US market as an alternative to the local market. It is liquid, it is transparent, and there's real time access to news and information," he continues.
"The UAE, for example, is very much a trader's market, whereas the US is very much an investor's market, in that you're looking for long-term returns," he explains. "Of course you can find opportunities in both, but I think the Middle East is very much for traders, and the US very much for investors."
Butter concurs, emphasising that markets in the Middle East region are likely to remain unstable, especially when compared to their more mature US cousins. "Across the Middle East, it is a market heavily oriented towards retail, which would typically tend to be far more volatile," he explains. "The region is much more a trader's market, and the retail investor bias is very marked in most Middle East markets."
E*Trade have gone to great lengths to ensure online security, and are also wooing investors with an execution guarantee on all SAP 500 trades. The service charges a flat fee for trades, that is not affected by the size of the trade, and such commissions and fees are exactly as are offered to US investors. Moreover, the company is determined to make the platform as accessible as possible.
"We're already looking at wireless technology, as people in the Middle East are very comfortable with their phones and on their PDAs," reveals Abdulla.
"It's a channel that isn't necessarily as popular in the US, but would be hugely popular here," he continues. "Imagine the ability to invest in US companies such as Google or Apple or Microsoft, from a wireless device in Dubai?"
Nevertheless, Hassan is suspicious about trading on the New York Stock Exchange. His fingers have been badly burned in the Gulf, and he is reluctant to leave the familiar surroundings of the DFM trading floor, where at least he knows that he is not alone in haemorrhaging cash.
"I have to get my money back now. I cannot afford to lose it," he shrugs, despondently. "I like the idea of making money on the US markets, but until I get back what I have lost on the DFM, I have nothing to invest."
For Hassan, it seems that the mean streets of the New York financial markets are just too far away - for now.
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