# IPO Chaos - The Great Arabian Bubble



## juiced (Aug 18, 2004)

The rush to buy shares in the USD267m Ettihad Etisalat IPO continued yesterday in Saudi Arabia with police called in to deal with choatic scenes as investors battled for application forms. A manager of one bank was beaten up and three staff sacked at another bank for improper conduct, reported agencies. A further 1m forms have now been added to the initial 2m.

http://www.ameinfo.com/47752.html

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Foreign stock brokers do not often call the top of a stock market bubble. But last week Japanese broking giant Nomura issued a report on 'The Great Arabian Bubble' which has formed in the UAE and Saudi stock markets. It is not often brokers are so clear in their warnings.

The analysis traced the recent development of Saudi stocks and super-imposed the Nasdaq market during the dot-com years of the late 1990s and early 2000. Not only is the Saudi market's rise similar in shape to the Nasdaq, but stock price rises in Saudi Arabia are actually significantly higher than in the dot-com years!

Nomura's analysis is just an articulation of what many professional market analysts say in private about GCC stock markets.

On the one hand, the economic fundamentals of the region are excellent. High oil prices, relatively low interest rates, economic reform, a boom in real estate and massive liquidity. These are all great reasons to be positive about the business outlook for the real economy.

But stock market investors have run well ahead of the game and heavily borrowed retail investors have fuelled 'The Great Arabian Bubble' in stock values, with a historic price-to-earnings ratio of 50 for the stock market in Saudi Arabia.

Nomura argues two possible future scenarios: a nasty correction or a long period of drifting sideways. And with hectic retail activity, with house wives and air cabin attendants joining in the fun, and a lot of lending by local banks who also appear to have got the bug, the former rather than the latter looks most probable.

Will this damage the real economy? Clearly some impact on consumer spending and bank lending might be anticipated. But the UAE and Saudi economies are likely to be able to take a stock market crash in their stride.

The Nomura report compares this situation to what happened in China where stock markets have crashed since a peak in August 2000 and yet the real economy has been through a period of phenomenal growth. GCC stock investors could still be right about the future but get their fingers burned by a stock market correction.

They will find that hard to understand. But that is the whole point, they don't understand what they are doing and will probably only learn the hard way. Nomura advises its clients to 'aggressively reduce' stock holdings in the UAE and Saudi Arabia.

http://www.ameinfo.com/63308.html


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## Dubai_Boy (May 21, 2003)

Lets take Nomura to court


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## dubaiflo (Jan 3, 2005)

that is the next gold rush ,after properties...


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## SA BOY (Mar 29, 2003)

There is an excellent article in this weeks Arabian Business about the IPO rush and the Nomura take on it all, its more detailed than the one above but very intresting. one fact was that the Saudi markets are due for a massive correction, this is due to such things as Saudi tel is worth more than BT(UK), Bell(US) Franco Tel(france) and Telkom (SA), which is pure bulls&it.
Looks like there will be some burnt fingers before long


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## DUBAI (Aug 24, 2004)

Dubai will be in the shit when this bursts. might even bring forward the 2007 property bubble burst.


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## ragga (Jan 23, 2005)

I dont know about that... it may sound crazy but i dont know if there is even a bubble yet here in dubai, its at its baby stages, of COURSE there is a correction as is EVERY developing market, i guess again we will have to wait and see.. one thing for sure, if you want to flip properties this is the time to do it... once you generate some capital hold onto 1-2 investments if your worried about the bubble bursting... and then short term rent or sell off for quick money.


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## DUBAI (Aug 24, 2004)

this is not flipping properties!

this is gambling on a rising market price which will enevitably burst, probably in 2007 as most projects will be completed, creating greater supply, and a lot of people involed in the construction industry, and dependent industries will leave creating less demand.

drop in demand, spike in supply = price crash = bubble burst.

flipping properties involves adding value to them. ie. buying a rundown flat and renovating it.


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## ChrisO (Feb 3, 2005)

Stock market crashs usually result in increased investments everywhere else. People wont put their money into shares but will buy real estate and commodities.

So a stock market crash is likely to re-fuel the property boom.


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## juiced (Aug 18, 2004)

but if they lose all their money in the stock market what will they use to invest in the property market?


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## malec (Apr 17, 2005)

Maybe other people? :weird:


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## ChrisO (Feb 3, 2005)

Oil price is still at record levels. Lots of cash coming in everyday. Currently the stock market might seem to be the most profitable place to invest and make money in a short period of time. A crash is going to change this sentiment and more traditional forms of investment become popular again.


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## SA BOY (Mar 29, 2003)

the biggest problem is the overstated value of items whatehr it be property or stock. I mean if its worth 100million you can borrow against it for 100 million , next month its worth 200 million so you borrow 200 million, then a market correction come along, banks are exposed and want their money back and you who has 200 million debt can only sell your asset for 100million cos thst its real NPV, oh shit now what??


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