DFM falls 3.8 per cent back to 2004 levels, Muscat off another 4.9 per cent

Dubai stocks fell to earth today closing 3.8 per cent down at a level below the lows of last summer and not seen since 2004, before the stock market boom of 2005.

In 2005 the Dubai Financial Market was the best performing stock market in the world. It crashed in 2006 to record one of the world’s worst performances that year and has been bumping a long the bottom since then.

The ArabianMoney newsletter out today (sign-up here) argues that the DFM will reach a true market bottom by the summer. By then global stock markets should have corrected sharply due to higher oil prices and that process will subsequently bring oil prices down alongside Dubai share prices as in late 2008.

Contrarian view

With shares at a very low ebb, and oil prices temporarily low, that will be the time for contrarian investors to buy, says the only independently produced regional investment newsletter.

The upside will be in much higher oil prices and revenues to come to the UAE, an inflow of capital and people from troubled Arab states – particularly Bahrain based financial institutions – and lower interest rates thanks to capital inflows.

That said the Muscat Securities Market also took a beating today – down 4.9 per cent – on serious unrest in the southern city of Sohar with at least two deaths confirmed yesterday.

Normally higher oil prices would be good news for Gulf stocks but not if they come because of political instability. Investors are still counting their losses in Tunisia, Egypt and Libya and are not happy about the immediate outlook. Their fear has a self-fulfilling impact on share prices as they go into cash for safety.