Not walking on the wild side

The UAE stock markets registered a dismal decline of 40 per cent last year. In light of such poor performance, we spoke with local analysts on the prospects of the market in the coming year.

It's time to review how they have fared in their predictions, assuming nothing terribly dramatic breaks the trend in the next two weeks.

Generally, most of those we tapped said the worst was over and prospects for 2007 looked better.

No one stuck their neck out in terms of forecasting a timeframe of recovery and how much of a climb the markets might witness. Opinions varied between being just too general and a little less general!

Try this for size: "I can be sure that 2007 will be better than 2006. But that does not amount to saying much. It will be better in that there will be less of a drop. Does that mean it will be up for the year - I am not sure."

Another expert echoed the thought: "There is now less downside than upside. It will fall less, and the probability is it will rise more. But that's a general statement."

A third said that, with the fundamentals expected to remain solid, most blue-chip companies and the banking sector could fare well.

A fund manager from Abu Dhabi was of the opinion that, "although in the short term the markets [might] continue to be jittery, there appeared to be a very favourable backdrop for longer-term equity returns based on such economic factors as firm economic growth, buoyant oil prices and strong corporate fundamentals."

The fifth respondent told us he did not see GCC retail investor sentiments improving anytime soon, but incoming foreign institutions would have no such negative thoughts.

Given the steep crash, which all suitably agreed had been expected, some said that investor sentiments were so deeply frayed that it would take time to regain confidence.

It did take time, but the recovery has been pretty steady, although with some hiccups when Emaar's behaviour on the land-equity deal with Dubai Holdings did impinge on market confidence.

Now the markets are up 40 per cent or so this year. The fundamentals remain strong - with oil prices reaching historic levels - and corporates have indeed done well. The much-discussed housing slowdown is nowhere in sight. And the foreign investors have been coming.

So what should we think of analysts' opinions? They can have a habit of deliberate obscurity, or vague precision, or whatever you might like to call it. After all, the markets here remain relatively immature, and even in Western markets predictions for the year can be hopelessly wide of the mark.

Hanging numbers

Overall, without actually hanging numbers on their forecasts, they haven't fared too badly.

Their remarks are quite naturally rather detached. The virtue of that is that it doesn't appear like you're subjectively talking up your business. And those who seemed to keep it a bit too general are only in the same league as those everywhere whose natural reaction is to veer only modestly from consensus opinion (which has - in terms literally of averages - a pretty good record on actual outcomes).

They would be happy to have stayed on the safe side, while those who were a little more sanguine may be elated - especially if they invested accordingly.

So what should we think of analysts' opinions? They can have a habit of deliberate obscurity, or vague precision, or whatever you might like to call it.