For the Dow Jones Islamic Market Indexes, October turned out to be the best monthly performance of 2011. Not only did the vast majority of the indexes post solid gains, but October also saw a rebound in gauges that heretofore had performed poorly through 2011's first nine months. The buying spree was mainly triggered by the 50% cut of Greece's sovereign debt as agreed by the European Union and Athens' creditor banks. The United States' 2.5% real gross domestic product (GDP) increase in the third quarter also raised optimism.
The Dow Jones Islamic Market Europe Titans 25 Index was also higher, closing October with a gain of 11.71%, while the Dow Jones Islamic Market U.S. Titans 50 Index surged 9.88% for the month. (For comparative purposes, the bellwether Dow Jones Industrial Average posted a 9.54% increase for October.) Investors and analysts were unsure if October marked a trend reversal or just an autumn blip. The initial euphoria was tempered as Prime Minister George Papandreou of Greece called his citizens to back Europe's bailout plan in a referendum -- a call which led some equity markets to tumble on November 1.
Regionally, Eastern markets' performance topped all other parts of the world in October. The Dow Jones Islamic Market China Offshore Index posted the largest monthly advance, closing 17.14% higher. This index was followed by the Dow Jones Islamic Market South Korea Index, which gained 16.91%, and the Dow Jones Islamic Market BRIC Index, which advanced 13.46%. The appetite for Eastern stocks was driven by news that China's GDP growth slowed in the third quarter to 9.1% from 9.5% in the second quarter, signaling Beijing might be able to manage a "soft landing" of its partially overheated economy.
Among the sector indexes, the Dow Jones Islamic Market Oil and Gas Index rebounded in October, closing up 16.75%. The surge in U.S. crude-oil prices above US$90 per barrel (up 18.6% in October), however, failed to lift the Dow Jones Islamic Market GCC Index significantly; this composite gauge which measures the performance of publicly listed Shari'ah-compliant firms, such as Saudi Arabia's largest Islamic financial institution Al Rajhi Bank and Kuwait-based Boubyan Bank -- advanced 2.10% for the month.
Gulf Arab equity markets suffered from capital outflows due to the "Arab Spring", although within the Gulf Cooperation Council (GCC) nations, only the Kingdom of Bahrain has witnessed continued protests. In addition to Bahrain, the other GCC countries include: Saudi Arabia, Kuwait, Qatar, United Arab Emirates and Oman.
Meanwhile, forecasters are cautiously optimistic about the prospects for economic expansion in the GCC region, with the IMF predicting 7% growth in 2012.
The Dow Jones Dubai Financial Market Titans 10 Index was one of the DJIM series' worst performers of October, closing down 0.37%, despite low stock valuations. In Dubai-related financial news, the Swiss private bank, Vontobel, became the latest financial institution to launch private banking services in the UAE emirate, bridging the geographic gap between the bank's headquarters in Zurich and its Asian branch in Hong Kong.
About the Author
Gerard Al-Fil is a financial journalist in Dubai. He works as a Middle Eastern correspondent for the Swiss financial website moneycab.com, Dubai-based portal AME Info, Swiss banking magazine 'Schweizer Bank', and for the German weekly 'Euro am Sonntag'. He has reported from the UAE, Kuwait, Bahrain, Qatar, Oman, Turkey, Iran and China. Mr. Al-Fil holds a diploma in business administration from University of Duesseldorf and a post-graduate diploma from the Institute of Islamic Banking and Insurance (IIBI) in London.
© Business Islamica 2011
