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Comment: Dubai steers through the turmoil

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With much of the Arab world undergoing transformational social and political changes, Dubai appears to be the beneficiary of the perception that the sheikdom is one of the more stable markets in the region. Gérard Al-Fil (pictured), who writes a regular commentary on the Dow Jones Islamic Market Index, looks at recent developments…

For the month ended March 29, the Dow Jones DFM Titans 10 Index, which measures the performance of the ten largest Shari’ah-compliant stocks listed on the Dubai Financial Market (DFM), has posted the largest gain (11.60%) within the Dow Jones Islamic Market Index (DJIM) family.

The United Arab Emirates has not experienced any civil unrest, and Dubai – known as a hub for trade, banking and tourism – seems to have been rewarded by investors for its stability. Dr Nasser Saïdi, Chief Economist of the Dubai International Financial Centre, noted that, with the largest free port in the region, Dubai has reaped the benefits of expanded manufacturing production from countries such as China.

Also helping was the re-opening of the Egyptian Exchange, after a seven-week shutdown, which boosted the global investment community’s faith in Middle Eastern business and finance.

Nevertheless, risks remain. “Continuing rising oil prices, which currently trade at a 29-month high at USD104 per barrel (light crude), could harm production, trade activity and consumption as in mid-2008,” says Dr Farouk Soussa, Citigroup’s Dubai-based Chief Economist for the Middle East.

The civil war in Libya, which triggered a military air campaign from NATO-forces against the nation’s leader, Colonel Moammar Gaddafi, has lifted energy prices and global uncertainty. Moreover, the earthquake and nuclear disaster in Japan weighed on investors’ sentiment, resulting in the DJIM Japan Index posting the DJIM’s largest decline in March (7.11%); in comparison, the global bellwether index, the Dow Jones Industrial Average, increased by 0.43% during the same period.

In the sector indexes, the DJIM Utilities Index rose 2.16% (the month’s top gainer), while the DJIM Technology Index fell 2.67% (the group’s worst performer). The Dow Jones Citigroup Sukuk Index, the DJIM composite for Islamic bonds, gained 0.72%.
 

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