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Thu 8 Jul 2010 06:42 AM

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Arabian Business Think Tank - July analysis

Revealed: the reasons behind the decision of the Arabian Business Think Tank members.

Arabian Business Think Tank - July analysis

Dubai Financial Market: The ABTT is united in predicting that 2010 will see a come-back for the DFM. The question is how big a comeback?

While again pointing out that a few stocks are determining the trend, their end of year forecast of 1,750 is 6 percent down on May.

Two members of the ABTT argued that fears of a double dip recession in the West are making them think again.

Saudi Tadawul: Consumer spending in Saudi Arabia continues to rise, and so far it has been insulated from the world’s financial crisis.

But there are growing fears within the ABTT of a slow-down in some major infrastructure projects. The end of year forecast of 6,400 is only slightly higher than today’s value, and a huge 17 percent down from two months ago.

Property prices: While the average prices for an apartment on the Palm Jumeirah have remained at AED1,200 per square foot, the ABTT continues to believe that overall prices are heading south.

With the summer now underway, more distress sales are expected, pushing prices further down. The latest 12 month forecast of AED1,011 per square foot represents a 10 percent fall in confidence.

Gold: The rising price of gold in the past two years has reflected the rising uncertainty of financial markets about both the dollar and the general global economy.

That uncertainty is still there, hence the ABTT forecast that the price of gold will keep on rising. Though their optimism appears somewhat dented, with two panellists arguing that a “pause” in the European financial crisis gave them hope of some level of recovery in Europe’s financial markets.

Euro v Dirham: The panel remain completely divided on this issue. While some argue that the only end to the euro story is the end of the euro as a currency, other members are convinced that we have seen the worst. The huge spending cuts across the continent are widely welcomed and seen as giving support to the euro zone. Their forecast of 4.4 is only 3 percent less than two months ago.

Confidence Index: For our confidence index, we have looked at the change in forecasts since the previous meeting of the ABTT, two months ago.

Using those forecasts as a “base” level, the percentage difference in average forecasts is seen as the change in confidence. The next meeting of the ABTT, in September, will then use the July figures as the base level.

Based on these assumptions, overall confidence is down a significant 9.3 percent in two months.
Across all sectors, the ABTT is concerned that fears of a double dip recession could spread to this region.

Some members are already predicting more job cuts later this year, and reporting revenues sliding compared to this time last year.

Confidence in the property market (down 10 percent) and the Saudi Tadawul (down 17 percent) appear worst affected.  

Put simply, the economic outlook is not rosy, according to Think Tank members.

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