Global Investing

Dubai dream over for western investors

Real estate prices are in freefall. Billions of dollars worth of projects have been cancelled or put on hold and expats are leaving in droves as they lose their jobs. Once a playground for the rich and super-rich, the seaside emirate — home to palm tree shaped islands, mega malls and luxury sky-rise hotels — has lost its lustre. And bargain-basement assets are not yet cheap enough to tempt buyers back. 

European investors, who once clamoured to Dubai, reckon they can land better deals closer to home or elsewhere in the Gulf. Some analysts are predicting that the more stable markets in Abu Dhabi, Doha and Saudi Arabia to recover faster than Dubai.

 “Dubai is not one for us. I prefer long-term established locations with underlying intrinsic attractions or clear, sustainable competitive advantages,” Bill Hughes, managing director, Legal & General Property, told Reuters.

True, Dubai offers guaranteed sunshine for almost 365 days of the year, tax-free salaries and arguably the most westernised lifestyle in the Gulf but the boom-bust characteristics of its real estate sector will likely deter many investors from taking the plunge.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed. But a UBS report last month said Dubai house prices could fall up to 70 percent from their fourth-quarter 2008 peak. A Reuters poll in March showed prices were likely to fall more than 40 percent in 2009 and 2010 before recovering in 2011.

from Commodity Corner:

Correlation Between Oil and Equities Markets

oil-vs-stock-market

Oil prices have been trading in an unusually strong positive correlation with equities markets over the past few months on hopes that signs of an economic recovery could mean a boost for energy demand.

But with oil and product inventories swelling and little sign of demand improving in the United States and other big developed economies, analysts warn that the linkage may be hard to maintain, especially if U.S. motorists cut back on vacations this summer.

from UK News:

Walking the risk-reward tightrope in Iraq

It's fair to say that investing in Iraq is not for the faint-hearted.

Just last week more than 200 people were killed in suicide bombings across the country, while kidnapping and armed assault remain commonplace.

That said, more than 600 delegates still turned up to the Invest Iraq 2009 conference held in London this week, eager to find out what opportunities there might be in the oil, construction, petrochemicals, engineering, agriculture, transport and tourism industries, to name a few.

From City of London bankers to executives from Shell and Chevron, bosses from energy service companies and airport construction firms, management training specialists and security advisers, they were all there, milling around a west London hotel in their smartest suits, seeing what business they might be able to do.

Gold offers double-edged shine

It was Goldman Sachs who famously predicted oil prices to reach $200 a barrel last year, but there are a school of bullish investors who forecast a substantial rally in gold.

Take Gold and Energy Advisor, which predicts gold will soon reach $2,500 an ounce (from today’s $895) then to $5,000. The Florida-based firm argues that gold is the only asset class that’s not only private (as opposed to state-owned), but also liquid, portable, fungible, divisible, and valuable enough that a small amount can store a massive amount of wealth.

It also argues that of $11.5 trillion stored in offshore accounts and other assets, if one percent were transferred into gold, that would be almost four times the entire annual investment demand for gold.

How to Spend It – for sovereign wealth funds

As dust settles and investor morale improves, sovereign wealth funds are slowly coming back to the market.


But they are not going to simply repeat what they’ve done in the past few years — hunting bargains in everything from property to banks. They are likely to carefully balance out the temptation for higher returns and the need to invest in strategic assets which benefit their own economies.

The so-called “south-south” trade is set to gather pace, providing much-needed capital inflows to emerging markets.

from Funds Hub:

Watch Pi Capital CEO David Giampaolo give his investment outlook

Giampaolo was speaking today at the London leg of the Reuters Hedge Fund and Private Equity Summit.

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It’s 2 o’clock. Let’s buy shares

It’s 2 o’clock. You’ve had your lunch. Now what should you do?

Buy shares, if you follow what U.S. bank Goldman Sachs has found from trading patterns among major U.S. equity indices and ETFs.

According to Goldman’s analysis, the S&P 500 index has tended to do substantially better during the last two hours of trading.

Since the start of 2008, the index increased by an average of 11 bps per day between 2pm and 4pm. In contrast, between 9:30am and 2pm, it declined by an average of 24 bps per day. This translates into a cumulative return of 35% for holding the S&P index between 2pm and 4pm versus -54% for holding it between 9:30am and 2pm.

Reuters Funds Summit: Kingdom for a horse

Anyone expecting investors to start galloping back into riskier assets in a rush might have something of a wait, according to Kathleen Hughes, who runs money funds for JPMorgan Asset Management in Europe. They are more likely to wander back in.

“Risk appetite returns in stages. It leaves on a horse but comes back on foot,”  she rather neatly told a Reuters funds summit being held in Luxembourg.

There are nonetheless some signs around that show leather is getting some wear. Fund trackers EPFR Global says that although overall fund flows fell during the second week of March, there were some signs of growing risk appetite. Commodities, technology and energy sector funds as well as global emerging market equity and non-Japan Asia funds all saw net inflows.

Whoops!

Just how much have world stocks suffered in the past year or so? Try this. According to the World Federation of Exchanges, the market capitalisation of global stock markets has halved. It was $63 trillion in October 2007. At the end of January this year it was only $31 trillion.

 

It has all been more furious than most people can recall as well. When the internet-stock bubble burst at the beginning of this decade, MSCI’s all-country world stock index lost around 51 percent of its value from peak to trough. In the latest drop, the index fell 58 percent from an all-time high in November 2007 to a new cycle low yesterday.

 

And it has been fast. The internet-stock bubble decline took slightly more than 30 months. The current fall has taken only 16 months.

Zeitgeist check

Some more bits and bobs to capture the current mood among investors.

–  So far, 2009 is worse than 2008 for stock investors. MSCI‘s main world index is down around 17 percent in January and February.  A year ago, it had lost around 8 percent.

– Eastern and central Europe are the new worries because of bank exposure to troubled economies.  ”The travails in the east, like the vampires of folklore, are sucking the lifeblood from European markets and investor sentiment,” State Street suggests.

– Cross-border flows into the euro zone hit record lows in February,  the same firm says.