The Middle East Markets Get Pummeled

Some people think the Middle East is living in another century. Well, the region apparently just arrived at 1929.
The stock markets across the Arab world dropped dramatically yesterday. The Dubai Financial Market dropped 11.71%, which is eerily similar to the 11.73% that the Dow lost on October 29, 1929. Since its January high, the Dubai index is now off over 44%. But the good news is, they don’t run our ports!
I don’t mean to say “I told you so,” but I did, in fact, tell you so four months ago. (Dubai: Do Sell).

This is a good time to remember that there’s an interesting correlation between market crashes and the largest buildings in the world. The Empire State Building went up just as our market crashed. The Petronas Towers were built as the Asian Tigers fell apart. The World Trade Center and Sears Tower accompanied the crash of the early 1970s. Even the Nasdaq’s shiny new office was opened just before its bubble burst.
The price of oil is already well below its high price. What’s good for consumers here isn’t good news for Dubai. I think Dubai is ready for a fall.

And it’s not just Dubai. The pain is being felt all across the region. Since February 25, the Saudi Index is down 28%. According to Bloomberg: “Finance Minister Ibrahim al-Assaf said his government won’t intervene to stop the slide, the Saudi-owned television station Al-Arabiya reported.” So the state-owned media is telling us that the state won’t intervene in the markets. Somehow, I’m not relieved.
In Egypt, the government is working to prop up shares. The main index there, the CASE 30 Index, has doubled in each of the last three years. The index dropped 5.9% yesterday.
The Kuwaiti index is down 17% since February 7, and there have been protests for the government to do something.
For all the pain of a market crash, I’d like to believe that a financial crisis is an important step towards democracy. I even found a very sensible editorial against government intervention here. I hope the authorities behave reponsibly like a mature democratic country would, and not do anything dumb or silly to play upon public anger.

Posted by on March 15th, 2006 at 7:32 am


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