First with Financial Comment from Arabia

Dubai business cycle to turn up in 2012?

with 3 comments

With Dubai equities taking another bashing yesterday it was intriguing to read in the Gulf News that senior Dubai businessman Sheikh Maktoum Hasher Maktoum Al Maktoum believes the next upturn should start in 2012, although a full recovery is years away.

‘It usually takes five or six years to recover from a downturn,’ he told a morning business conference in Dubai. That would mark late 2013-14 as the time of the next boom.

Stage six

This website has offered a perspective on the Dubai business cycle and its position at stage six, the moment of ‘capitulation’ by investors (Click here for the article).

Timing the upturn correctly is clearly important both for short and longer term investors in Dubai stocks and real estate. But calling an absolute bottom is very difficult. For example, we do not have a clue whether March this year was a bottom for US stock markets or just a step on the way down.

Again this website has argued that global stocks have another fall coming after their massive rally since March (Click here) but it is very tough to say whether this will go lower than the March low. The fall in stocks would clearly be met by a tidal wave of new liquidity, although whether that would stop the selling is not certain.

But isolating the Dubai business cycle from the global situation and what Sheikh Maktoum is saying makes good sense. That would imply a local stock market bottom in perhaps 12 months time and a bottom for real estate in 18 months.

Bottoming process

Then you would have a period of flat-lining at the bottom before something happened to spark a recovery: perhaps an upturn in the oil price, privatization of assets or reforms in business laws. There has to be a catalyst and as a dynamic business hub Dubai will be a place to watch for such a spark.

The problem is that this still leaves a long and difficult road ahead. Firms that are presently overstaffed and operating at a loss will either go for painful downsizing or face extinction. Firms that are boldly expanding into a downturn are doomed.

2012 is just going to be too late to save everybody from the recession.


Written by Peter Cooper

December 8, 2009 at 10:11 am

3 Responses

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  1. Emirates airline has been a hugely, and quietly, subsidized financial failure. In addition, the airport is well over 50% transit passengers that never even leave the airport. Again, a locational advantage, nothing more, and hardly a huge ‘economic’ driver.

    The only reason the container port is so big is that it is essentially the only relatively stable country in the Gulf with a location advantageous to a port. Besides, one large container port an economy doth not make.

    What exactly is traded in dubai as a trading hub? The only thing that has highly traded in dubai over the last 10 years is propaganda and over the top ‘visions’.

    Ed Note: Most of the trade of the Gulf States with the world goes through Dubai – as you know they export oil and buy a lot of things. Dubai is a very rich city, many rich people live here – they buy things and need homes. Then there are all the tourists who come and buy things. This is a major business and trading hub – that is why all those banks lent so much to Dubai.


    December 9, 2009 at 3:37 am

  2. Don’t bother peter…it seems Tom is an avid follower of British tabloids


    December 9, 2009 at 12:19 am

  3. There is fundamental problem with your reasoning. Dubai does not have a functional economy. It had a fake economy which basically lived off of 100 billion dollars of borrowed money for the last 10 years. That money is gone now, and won’t be replaced, ever. There is no real economy in dubai, it was all a fraud and a ponzi scheme.

    Ed Note: so Emirates Airline, the world’s biggest container port, sixth largest airport, Middle East trading hub, this is all an illusion. Come on, you are the one living in a fantasy world.


    December 8, 2009 at 6:31 pm

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