Middle Eastern stock exchanges plummet

March 25, 2006

Although no one knew it at the time, in late November 2005 the Dubai Financial Market had reached its peak. Since then, it has given back all its gains in the past year. The same trend is true for Tadawul, Saudi Arabia’s stock market, and the Kuwait Stock Exchange, although not quite as dramatically.

What It Means:
The Middle Eastern markets have seen a tremendous growth in the last three years, so they were due for a correction. However, if the trend continues, more than a correction may in place. Only a third of those polled on the Dubai Financial Market website believed that it was the events in the Middle East that were negatively affecting the market.

Action Steps:
If you want to participate in the growth of a region, say the Middle East, a well diversified mutual fund that includes many of the companies from the region is a better way to go than a country fund, or investing in that country’s stock market. The average investor does not have the time or expertise to become as knowledgeable as needed to take on the risk from one area.

Source: Dubai Financial Market, Tadawul and Kuwait Stock Exchange websites.