Dubai stocks went bonkers last year, along with Qatar, distorting the performance of the (anyway tiny) frontier markets index.
Locals rediscovered their lust for equities, while foreigners were excited by a potential upgrade to emerging market status and the billions of dollars of inflows from index funds that would represent. In total the index more than tripled in two years.
In the past month it’s all gone wrong, and strategist Andrew Howell at Citi has a good reason why: the performance of Dubai, represented by the MSCI UAE index, looks very much like the out-of-control price inflation represented by the Nasdaq during the dotcom bubble.
If his comparison has more to it than similar percentage gains and a matching double-top pattern, investors may rightly worry about prospects for the next couple of years. Dotcom investors, after all, only had to worry about bonkers prices, without any risk of a religious war in the region. (The x-axis represents days before and after the peak.)
Source: Citigroup
Those looking for a reason to buy could look further back (chart below).
Outsiders may see froth, but compared to the run-up in shares in 2004-2006, this is nothing. In the middle of that bubble, in just a month from late June 2005 the market lost a quarter of its value – before going on to gain another 63 per cent. It is now worth only half what it was at its peak. A bargain, surely…
No comments:
Post a Comment