Hisham Shehabi's  Instablog

Hisham Shehabi
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I focus on investment themes in the G.C.C. region. I comment on the states of economy, business news, corporate actions, and investments that I think are worth looking into. I would like to bring an insider's focus of the region to readers across the globe, engage in discussions about the... More
My blog:
The Simmering Pot
  • Dubai: Weird story of correlation 2 comments
    Jun 14, 2010 7:02 AM
    • Greece needs bailout money
    • Spain might need some money too
    • Hungary needs money. Just kidding. Or are you? ...
    • BP could be bought out for chump change very soon
    All these headlines seemed to batter the global stock markets over the preceding 30-45 days, and rightly so. I mean, really, when was the last time that the stock market swung upwards or downwards on anything other than sentiment, news, and skin deep factors? Besides the fact that for the last two years we have not seen investments in asset classes based on fundamentals, the reality is there are opportunities out there for dirt cheap.

    But that is something I will touch upon in a later article, hopefully not so far away from this post. The idea i wanted to share with you is that global markets seem to have synchronized quite well. US up, then Asia is up, US down, then Europe down, Europe down, then Asia down. So we see a lot of correlation nowadays between the capital markets; or more so than in the past.

    My dilemma, you see, is that the GCC (where most of my funds are) seems to be bucking the trend and raising a finger to the global investor. "Nay!" says the GCC stock market after seeing an incredible upswing in the US and Europe on the close of trading. It is terrible to see this when my funds are invested here, but I find it to be a blessing. I get to buy better goods (good companies) for cheaper prices. Power to the nay sayers, says I.

    My focus point in this region is Dubai. More so than its lovely oil-rich neighbors the Dubai Financial Market is a very volatile stock market that has moved downwards when the rest of the world has, and moved down some more or stabilized if global markets move up. A fine indicator of how bad things really are. Is Dubai just thick? Are its investors so self-destructive that they throw good money after bad in their chase to the bottom of the market? Is it market manipulation... ?

    These questions have an evident answer (except for the third, which I still am not sure of) and that is No. Dubai is an indicator to the state of the economy in a country that has lived in excesses for too long. Sound like a country you know? US? UK? Europe perhaps?

    As the Dubai Finanacial Market index hovers around the key 1500-point level, I believe that if it does break this level while the rest of the world sings songs of freedom and salvation (from the crisis' claws), it will be a loud cry of pain when the world wakes up to its dire condition and deteriorating health.

    I might be a bit too cynical. That is true, and I agree. But the numbers tell a different story. Unemployment: high. Defaults: high. Provisions: high. These are all eating at the financial system and closing down the credit tap. I hope for a good year for all, but my wish won't come true; of that, I am sure.

    Investor, o investor, if you are still out there and still have the kahunas to put your money in that jungle we call a capital market, find good companies, with good prospects, strong products, and better margins and you won't need to worry about all this hub-bub on the news everyday.

    I agree that the structure of this article is terrible. This more a rant than anything else, as I was simmering for the last few months on the condition of the global economy and the consequent underperformance of the global markets.
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  • TrustinAudi
    , contributor
    Comment (1) | Send Message
    wow nice rant..you're basically asking investors to grow a pair of brains and spend their money wisely unlike most "self-destructive investors in Dubai". something i definitely i agree with. living in luxury does not last when sh** hits the fan. I do not believe Europe or US will face such terrible situation however. Europeans are known to be extremely pessimistic therefore tend to avoid such situations. The US can't afford it since many currencies are tied to the dollar. Small countries will fear greatly if the dollar drops even further and i presume will act in response. Not to mention, US' dominance in almost every market may help but may also be a bad thing at the same time.
    14 Jun 2010, 10:49 AM Reply Like
  • Hisham Shehabi
    , contributor
    Comments (2) | Send Message
    Author’s reply » thanks for the comments TrustinAudi. i will agree that europeans are conservative, however i would like to point out to you the level of exposure of european (mainland germany, nordic, france, luxemborg, switzerland, etc) has to eastern europe (where public finances and GDP are deteriorating increduously) flutethoughts.blogspot...


    on the US front, you are right, most global trade is now done in dollars, and most reserves (70%) are also in dollars. however, countries like venezuela, iran, china, north korea, even russia have started to offload dollars in favor of a more balanced reserve. gold and the euro have been beneficiaries. but i'll have to agree that this is a small move against the dollar. no other reserve currency can replace dollar in the current moment. look for more balance in currency reserves.


    thanks for your 2 cents trustinAudi. keep em' comin'
    15 Jun 2010, 09:36 AM Reply Like
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