Bad news bears see no value in value

Who would be a stock picker in the Gulf this past month? The people who are paid to understand the mysterious ways in which the regional markets work, tell us there's value to be had out there.

But the erratic and mainly downward movement in stocks through August and into September would suggest that both retail and institutional buyers of equities think otherwise.

In the month to September 10, the Dubai index retreated nearly 15 percent, while Abu Dhabi was down more than 12 percent and Doha by the same measure.

And as I write, Emaar has hit a new 41-month low. Analysts cited a combination of bad news for the latest decline.

Investors, it seems, appear increasingly reluctant to believe there are regional oases of value to be had amid the global markets meltdown.

And that's understandable given the woeful economic data emerging from central banks and government departments from Washington to Tokyo.

In the US, as Treasury secretary Henry Paulson took control of the now notorious subprime mortgage lenders, Fannie and Freddie, it emerged that consumer spending slowed again in July.

In Germany, the country's world-class automotive industry was left reeling by the news that car sales dropped 10 percent in August.

And in Britain, the economy contracted for the first time in a decade during the third quarter - fuelling fears that the country may be entering its first recession since the dark days of 1991.

At the same time, UK homeowners learned last week that house sales had hit a 30-year low with some agents reporting just one sale per week.

Those economic ripples are now reaching the Gulf.

More worrying than the statistics that appear in columns and rows, are the comments from the business leaders who don't yet see a silver lining to the economic storm clouds gathering.

In our cover story of this week's issue of Arabian Business, British Airways chief Willie Walsh believes the aviation industry has never faced worse times ahead.

"I can't remember a situation where we have high oil prices, weak economic conditions in a number of key global markets, weak consumer confidence and the impact of the credit crunch," he says.

But let's not get too down in the dumps. Merrill Lynch tells us this week that the macro picture is still rosy in the UAE at least - with its ‘huge external surpluses, favourable demographics and relatively diversified economy'.

It also welcomes recent moves by the government to cool the real estate market which has produced some of the best returns available anywhere in the world over the last year.

The fundamentals are still good according to Merrill, regardless of how the bourses have performed in recent weeks. But with a whole lot of negative news out there and with the likelihood of more to come, the bad news bears may be around for longer than we think.

Sean Cronin is the editor-in-chief of Arabian Business English.

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