1. Crisis presents an opportunity: Following Dubai World’s decision to postpone its debt repayments for six months, the Dubai stock index sank 13 per cent over the next two trading sessions. Emaar Properties plunged 19 per cent and most stocks’ prices were going limit down over the same period. When everyone was selling off, Mark Mobius, executive chairman of Templeton Emerging Markets Group sitting in Hong Kong, saw this as a buying opportunity. He piled on shares of Emaar and some Abu Dhabi bank stocks. In the last five years, Emaar had gone down to Dh1.74 and today at Dh5.30 it is up 205 per cent.
“Don’t be afraid to go against the current when you have enough conviction,” said Fadi Al Said, head of equities at ING Investment Management.
Vijay Harpalani, assistant fund manager at Al Mal Capital, agrees. “Always try NOT to follow the herd.”
One should also not get carried away by investor exuberance which creates bubble-like situations, said Shakeel Sarwar, head of asset management at SICO, Bahrain.
2. Think long term and have patience:
“It is important not to have a knee jerk reaction to such events, as markets usually fall sharply due to panic selling and subsequently recover sharply,” said Sarwar. “The key is to adhere to the fundamentals of investing, that is, invest for the long term and in solid businesses.”
Some stocks such as Emaar that they have been investing in the last three years—was not doing much at the time of crisis, but this year some of them are up more than 100 per cent, says Al Said.
For example, from their lowest prices in the last five years, today Air Arabia is up 117 per cent, Sabic 186 per cent, Qatar National Bank a staggering 360 per cent and Emirates NBD 110 per cent.
3. Success in the investment world is all about decision making: Either you educate yourself thoroughly about the market, the companies and their financials and fundamentals, the sectors in which the companies are in and also macro trends, such as price of oil (which has a big impact on many petrochemical stocks), interest rates, etc.
“Wrong decisions are based on lack of information or misinformation,” said Reda Gomma, portfolio manager at Mashreq Asset Management. “Try not to invest in an asset, a project or a product line, if you are not sure that the information is complete and accurate. Making the right investment decision requires a detailed set of information about macro and microeconomics conditions, markets, sectors, industries, companies, qualitative and quantitative analysis, fundamental and technical analysis, behavioural finance and risk management.” So better to invest in funds or consult a financial adviser for guidance on investing.