Business | Investment
Tales for when it's cold outside
There is a stock market saying in the West called the January Barometer, which says: "As goes January, so goes the year.
- By Gaurav Ghose, Staff Writer
- Published: 00:32 February 16, 2008
There is a stock market saying in the West called the January Barometer, which says: "As goes January, so goes the year."
Recent research using the S&P 500 index as benchmark has found that between 1970 and 2004 when the index is up in January, the return for the year was on average 11.4 per cent and when it is down in January, the return is minus one per cent. In fact, when the index is up in January, in 86 per cent of cases it is up for the whole year.
A bit of learning, courtesy of the Internet.
We know what happened this January. The year started locally on a confident note - steady rather than exuberant - after quite a good run in December, only to slump between January 20 and 23.
Dubai Financial Market's index suffered the more, with the Abu Dhabi Securities Market remaining roughly unchanged. That was attributable, said Rasmala Investments, to the higher foreign presence in the DFM, and contagion from global equity markets.
Sedate start
Back to January 2007; jog your memory. After a disastrous 2006 for the regional markets as a whole, and the UAE no exception, local markets rose by three per cent in the month after a sedate start. The year ended positively: DFM's index up 45 per cent and Abu Dhabi Securities Market 52 per cent for the year. Thus, January showed the way for the rest of the year.
In the early days of this year, the mood was upbeat among investors and analysts - until it was dashed all of a sudden. Not only the UAE's but markets across the globe took a tumble and dented the gains made in the first couple of weeks.
The decline was the lowest since March 2006. The UAE's overall market, according to MSCI, fell five per cent in January.
Hard to judge
But with strong corporate results coming out in the past few weeks, and that expected to continue for the remainder of the year - with strong non-oil GDP growth projected for 2008 - analysts now say markets will recover, although no one I've heard or read actually hazards a guess by how much.
For the local scene, it's difficult to take much notice of folklore elsewhere for long-established markets: in this case in America about America. Going by February's stock market recovery (to this point), wiping out January's losses of Dh 22.5 billion was spoilt last week by Emaar's withdrawal of its Indian unit's initial public offering (IPO). And December is a long way away.
I'm hoping, as doubtless many local and regional analysts do, that the UAE market proves the US market folklore wrong. In any case, as an emerging market still, it will set its own patterns.
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