x Abu Dhabi, UAETuesday 16 January 2018

Gulf markets hit by speculation

Speculation is one major impediment to stability in any financial market, and it is widely practised in the Gulf. Other topics: Iraq unrest, UAE's precious water.

Lingering volatility in Gulf financial markets is largely due to unbridled speculation and leaks

Well-established and emerging bourses all around the world, from Japan to the United States, have managed to regain their vigour, with their indices returning to pre-crunch levels.

Financial markets in the Arabian Gulf, however, seem to be the exception, according to Mohammed Al Assoumi, a contributor to the opinion pages of Al Ittihad, the Abu Dhabi-based newspaper.

Gulf bourses are still suffering from sharp volatility, in a way that is poorly reflective of the rapid pace of growth and development in their respective countries, he said. This gives investors "the wrong impression" about the economic health of this region, for financial markets are, as common wisdom has it, a reflection of the overall state of the economy.

"Of course, there are a number of issues and roadblocks that could be resolved for the Gulf financial markets to overcome this crisis of confidence," Al Assoumi wrote.

Speculation is one major impediment to stability in any financial market, and it is widely practised in the Gulf.

"Gulf markets have suffered more than others from disproportionate speculation," the columnist said. "No one really expects the Saudi index to go back up to its pre-crisis level of 21,000 points, for instance. But it has the potential to reach half that - 11,500 points. Right now, however, it is stuck at 7,000."

Instead of working to attract more medium- and long-term investments to boost growth, local financial markets have turned into "speculation markets", Al Assoumi went on.

"Seeing that local investors are, in essence, acting like speculators, even foreign investors - to whom the Gulf markets are widely exposed - have grown into the habit of doing speculative investments, further damaging the reputation of the local markets."

The fact that these markets lack the necessary safeguards to curb speculation is not helping.

Also, the size of direct government investment, which is a stabilising factor, is insignificant.

"Here, the role of sovereign wealth funds in the Gulf could be particularly effective," the author observed. "These funds invest in all four corners of the planet, yet skip their local markets."

If they do hold some indirect investments through locally listed companies and banks, it is because they owned stock in many of these assets even before the establishment of local financial markets, he argued.

Then, there are the "ceaseless leaks" that set speculation on fire.

These leaks trigger a rapid transit of local and foreign capital, targeting a particular set of shares, which puts their prices on a roller-coaster that, in turn, yields sizeable returns or dramatic losses for those who sold or bought at its zenith.

Developing anti-leak legislation and safeguards is a prerequisite for this situation to change, the writer said in conclusion.

Iraq is on fire as sedition takes a toll

Warnings against "sedition-mongering" in Iraq are not in short supply; heeding them is what is missing, the pan-Arab newspaper Al Quds Al Arabi said yesterday in an editorial titled A fireball is rolling in Iraq.

The forceful security intervention against organisers of a peaceful sit-in in the predominantly Sunni town of Hawija has been the spark of the new wave of sectarian clashes that is currently convulsing Iraq.

The protesters were demanding that Prime Minister Nouri Al Maliki, who is a Shiite, order the release of prisoners said to have been thrown in jail for sectarian reasons. The incident left dozens dead and wounded.

"The government of Mr Al Maliki basically committed a massacre in the city, going after peaceful protesters holding political placards. Irrespective of the protesters' sectarian affiliation, the right to organise a sit-in is supposed to be guaranteed in democratic Iraq."

On Wednesday, more than 100 people were killed and nearly 300 wounded in ensuing sectarian violence, with car bombs going off in Baghdad again, the paper said.

Instead of using senseless violence against protesters, a better solution would be dialogue, the newspaper said.

"Mr Al Maliki must recognise his mistakes and review all his decisions that have sent the country down this spiral or violence and murder."

Preserve the UAE's true wealth: water

"We will never understand the true value of water until we lose it one day and regret every single drop of it. It is the most precious and valuable thing we can ever lose, yet it is the cheapest thing we can get," wrote Sami Al Reyami, editor of the Dubai-based newspaper Al Emarat Al Youm.

Many seem not to care about water security in the UAE, but the figures are alarming, he said.

"The UAE is among the countries with the easiest access to water in the world, which in itself is a good thing. But it has given way to ill-advised behaviour … Water wastage in the UAE is also the highest in the world, with per capita consumption reaching 500 litres a day, against an international average of 200 litres a day only."

The mishandling of this precious resource is partly to blame on the authorities that have the responsibility to put legislation in place to prevent irrational use of water, he said.

But the public also has an ethical responsibility.

"We are a desert country with scarce water resources, minimal rain and nonexistent rivers, yet locals and residents have no understanding of the urgency of rationalising the use of water," he wrote.

These habits must change if the UAE is to maintain stable water supply levels by 2030.

* Digest compiled by Achraf El Bahi