Markets need to pull in fervent foreign investors

When things don’t go according to plan and as a result someone is hurt, be it physical or financial, human nature looks for someone or something else to blame. When the Gulf stock markets succumbed to the impact of the global “credit crunch” in the second half of last year, that “someone” or “something” was foreign investors.

It is true that at the same time as stock markets in the UAE and wider Gulf region began to fall, foreign investors were selling their shares. But why?

There are two answers to this. First, during a time of such financial stress, investors will often have to repatriate their money to cover positions at home. Next, a considerable amount of speculative money flooded into the UAE markets in 2007 and early last year in expectations of the de-pegging of the dirham from the US dollar. When this began to look unlikely, the speculative money left. But the timing was unfortunate.