UAE Stocks (con't)

Last Tuesday, Dubai stocks dropped almost 12%, and on Wednesday they dropped another 2%. As reported previously, panic was ensuing, with disasterous results (as evidenced by the complaints of several Gulf wives).

Thursday saw a small rise in the UAE markets, but, according to my stock newsletter which comes out every evening after the market close, the rise was on very small volume, and so was probably meaningless.

But on Friday, the local newspapers reported that the government had stepped in to prop up stocks, and the decline was over. I waited for my daily newletter to report on Saturday's trades to see what had really happened. The newsletter did not arrive. So I checked the Dubai Financial Market website.

Once again, it appears a bear was slain with the jawbone of an ass.

When the always reliable local newspapers reported that the government had stepped in and would not allow stocks to fall further, panicked investors stopped selling. Given the small volume Thursday, it's not clear if the government actually stepped in, or just waited for a small positive correction in the general bear market decline to make their announcement. In any case, after the newspapers' re-assurances, there was no further panic selling, so stocks rose by more than 10% today. What we call a big bounce.

Whether it will continue is anyone's guess. The power of the jawbone is not to be underestimated, but it won't always stop a bear, unless wielded by Samson. Who, unfortunately, didn't make it into the Koran. (Though a Shamsung appears in some extra-Koranic Islamic legends.) Still, current market valuations don't seem terribly unreasonable at about 20 times earnings, and are certainly far more reasonable than they were when market prices were double current levels.

Stay tuned for the Sunday report.

NB. Stocks in the UAE trade Saturday through Thursday. Everything is closed Friday.