Sunday, Aug 30, 2015

Dubai:

Emerging market guru Mark Mobius, who is also the executive chairman of Templeton Emerging Markets Group, has urged local investors to “grasp opportunities” with a long-term view, when market come down substantially.

Amid the volatility, the Dubai Financial Market General Index fell below the keenly-watched 3,500, the level last seen in April. The index is still down more than 22 per cent on a year to date basis.

But Mobius feels that there could be more uncertainty going ahead due to lack of clarity on interest rates in the US.

“GCC markets are important in the emerging market space and thus deserve close attention. At this stage it is not clear that interest rates will rise, in view of the low inflation we are seeing, particularly in the US where talk of rising interest rates by the Federal Reserve has been the focus of attention,” Mobius told Gulf News.

Several officials at the US Federal Reserve acknowledged that turmoil in financial markets, if prolonged, could delay the first policy tightening in nearly a decade.

“In light of this uncertainty, it is important for investors to be calm in the face of high volatility and grasp opportunities when market have come down substantially. The key is to take a long-term view,” he added.

On valuations, Mobius said companies “in the UAE and all over the world are rather high, although there are some specific areas where the valuations are reasonable. This is generally true all over the world.”

Most of the blue chips have fallen from its crest including the names such as Emaar Properties, DAMAC along with Arabtec, and Dubai Islamic Bank.

“It seems that oil prices have overshot on the downside, but we can expect continued volatility both on the up and the downside. Price movements are determined by sentiment rather than real supply and demand,” said Mobius.

Most of the Gulf economies depend heavily on crude oil for revenues for their budgets. On Friday, Brent crude closed 5.24 per cent higher, above the keenly-watched $50 per barrel mark.

However, most analysts question if the oil rally would sustain going forward amid a supply glut and falling world demand. Oil prices have fallen more than 50 per cent since September last year.

“Our studies show that over the last 20 years the average change in supply and demand annually has not been more than five per cent up or down but, as we have seen, actual market prices have fluctuated far more than that,” he added.

However, Mobius added “it is important to remember that the stock or commodity markets do not move in sync exactly with the actual economy. Therefore, we must take care in not drawing conclusions from bits of news of either the economy or the market.”

By Siddesh Suresh ?Mayenkar Staff Reporter

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