More than half of emirate's real estate sales are now off-plan, attracting investors with quick handover
realty2 hours ago
But earnings were strong and economies everywhere were improving and stocks reflected the favourable fundamentals. The markets were ripe for a correction, however, and almost anything could have been the catalyst.
The events in the Middle East and North Africa coupled with the earthquake and tsunami in Japan unsettled markets everywhere. There was a sudden rush to liquidity, and currencies, commodities and bonds responded irrationally. Oil, which had risen over Middle East instability, declined because of concern about slower growth around the world. Other commodities also were weak for the same reason. Japan may require more fossil fuel for electrical power generation if nuclear capacity is reduced, and some Japanese food production may be contaminated, requiring more imported supplies. The 10-year Treasury yield declined even though the Japanese, who hold the second largest amount of US government securities (after China), were likely to use their trade surplus to rebuild their country and not buy at Treasury auctions. Gold also declined in the liquidity rush even though it usually rises in periods of major uncertainty. This initial behaviour (since reversed) mostly is indicative of a world where fear and a desire for current liquidity cause conditions at variance with what might have been expected.
I believe the situation in North Africa and the Middle East will stabilise soon. Colonel Gaddafi’s power will be reduced in Libya; the country may be divided into two parts. To remove Gaddafi from power probably will take US and other forces on the ground and President Barack Obama has clearly stated he will not authorise that. By supporting the “no-fly zone” intervention we are effectively providing aid to the Libyan rebel forces, and their political objectives (other than being anti-Gaddafi) are unclear at this time. Regime change will not move beyond Egypt and Tunisia. In spite of current demonstrations I think Jordan and Syria will remain under their present leaders.
In Japan the Fukushima nuclear facility will eventually be brought under control and the country will begin the recovery process. Japan’s economy was improving before this happened. While the country was shaken by this major nuclear incident, Japan is a remarkably resilient nation and the rebuilding could prove stimulative. There have been some plant closings and supply disruptions, but I believe these will prove to be temporary and most manufacturing facilities will be back to normal in several months. The United States economy was also gaining momentum before these events and Gross Domestic Product estimates were being raised. While the circumstances in Japan may have a short-term negative effect on world growth, I believe 2011 will turn out to exceed the expectations held by economists at the end of 2010.
Byron Wien is Vice-Chairman of Blackstone Advisory Partners. This commentary was sent directly to Khaleej Times
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