Experts in Abu Dhabi discuss equity market challenges

Abu Dhabi: Correlation between emerging and developed markets have been relatively diluting recently according to participants at 'Exploring the frontier emerging equity markets' hosted by the National Bank of Abu Dhabi (NBAD) in the capital on Saturday.

"When the 1987 crash occurred, correlation with the rest of the world was more obvious, yet the case was less severe with the Asian financial crisis in the late 1990s and the aggressive attacks on the Hong Kong dollar," Clifford H Quisenberry Jr., managing director of Investment Frontiers Research said.

Participants agreed that bio-fuels will take some time to provide for an efficient alternative to replace oil as a source of energy.

"For the foreseeable future of five to ten, even twenty years, fossil fuels will remain playing a major role as a source of energy," Clifford commented.

Difficulties facing the appropriate pricing of equities in emerging markets were thoroughly discussed, especially where a majority of traders, up to 93 per cent, are from the retail segment unintentionally controlling the actual pricing of listed prices in places like Russia for instance.

Governments role

"Governments also have a role to play, and that's a two-fold role; first when the concerned government is a majority holder in a specific asset or company, and hence feels the need to interfere in the market to rescue its holding from a sharp decline; or on the other hand when the market in general takes a steep downward trend, and accordingly needs government intervention to provide for a rescue package," commented David Burkart, principal senior portfolio manager at Barclays Global Investors.

Commodities and currencies were also the focus of concern. While the slowdown of the American economy will sooner or later have its toll on the Chinese demand for oil, easing the prices below $100 in a shorter term, although in the longer term a price higher than $130 cannot be ruled out.