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Emerging markets on the rise in March

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Both the Dow Jones Islamic Market Index series and the conventional Dow Jones indexes saw composites from the Middle East and East Asia on the rise in March.

After a humble 2010 debut, the Dow Jones Dubai Financial Market Titans 10 Index was boosted by rumours that Dubai’s state-owned conglomerate Dubai World is in an advanced stage in negotiations with its creditors over a restructuring of its crippling USD26bn debt.

The Dow Jones DFM Titans 10 Index jumped 12.21 per cent higher, closing at 2,422.61 points.

According to the report by Gérard Al-Fil, a financial journalist in Dubai, the next largest gainers were the DJIM South Korea Index (up 8.64 per cent at 800.79 points) and the DJIM Hong Kong Index (7.96 per cent higher at 1,510.40 points).

As a direct comparison, the conventional bellwethers Dow Jones Industrial Average in New York added 5.46 per cent (closing at 10,888.83 points) and the Dow Jones Europe Index ended at 267.50 points (up 5.70 per cent).

The emirate of Dubai and the United Arab Emirates (UAE) are undergoing a series of radical changes. Its building boom might have slowed, but Dubai has successfully constructed the first metro system on the Arab peninsula, which has been in operation since 9 September 2009.

“Dubai 2.0 will not be a remote place in the desert anymore, but a well-connected international hub”, says Jeff Singer, chief executive of Nasdaq Dubai. 

Moreover, the Gulf States have projects worth a whopping USD2.2trn in the pipeline, according to Dr. Nasser Saidi, chief economist of the Dubai International Financial Centre. Kuwait alone announced a five-year plan worth USD104bn in mid-March.

According to the report, shares of Kuwait National Airways have been added to the DJIM GCC Index, which covers Shari’ah-compliant stocks from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. They are considered Shari’ah-compliant (or pure) because civil airlines usually do not or post rather insignificant turnover with pork, pornography, tobacco, weapons, or interest-bearing financial products.

Another new addition to the DJIM GCC Index is Vodafone Qatar, which saw a USD1bn IPO in May 2009. The DJIM Kuwait Index dropped by a quarter per cent and finished at 861.95 points – one of the worst composites of March. However, it is still the top-performer on a year-to date basis (up 10.55 per cent). At the bottom of the charts, the DJIM Sri Lanka Index plummeted two percent and closed at 1,661.61 points.

According to Jennifer Choi, director of research, Emerging Markets Private Equity Association, emerging markets have not seen a major decline in the market for non-capital market financing, bringing innovative firms “from Main Street to Wall Street”.

“In 2009, 26 per cent of all private equity deals worldwide – which stood  at USD85bn – were done in the emerging markets in South America, Eastern Europe, the Middle East and North Africa and East Asia,” Choi says.

Rising activity private equity is seen as a prelude for increasing capital market liquidity. Privately financed firms, mergers or acquisitions are often followed by IPOs, listed spin-offs or bond issues.

However, PE firms and banks are focused more than ever on the “old economy” rather than on IT and biotech-firms, as they used to be. Consequently, the DJIM Industrials Index closed 7.59 per cent higher at 1,491.97 points – the highest of the DJIM industry indexes. All Shari’ah-compliant industry composites gained territory in March, according to Al-Fil.

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