Analysis of DFM, UAE
Anatoly Grigoryev | Sep 22, 2015 08:25AM ET
The following article is about a long-term analysis of the stock market and economy in general in Dubai Finance and Investment UAE, from the point of view of methodics called "Hurst Cycles". Judging by this technique, price movements of any kind and economic development is divided by 9- and 18-years cycles. In the end of each cycle, ideally, the market is supposed to reach a "bottom" again, followed by an extensive growth during the first half of the next cycle.
To begin with, let's find the starting point of the "bottom" cycles. Due to the fact that Dubai's market hasn't got a proper history of price movements yet, let's find a fundamental event which was a beginning of a rough growth and development of Dubai's economy. The clearest one is the one below:
On the 5th of May, 2002, the Crown Prince of Dubai and Vice-President of UAE, Sheikh Mohammed bin Rashid Al Maktoum, with a special decree let foreigners buy land and housing to the full property. This decree gave a birth to a building boom, still not ended.
Therefore we just found the starting point: the year 2002.
Let's build the chart, where we mark 2002, 2011 (+9 years) and 2020 ( +18 years) as well. Than let's put the cycles on the history of price movement of the stock index DFMGI and see what happened.
As we can see, exactly in the 2011 (at the end of 9-years cycle) the market achieved the next "bottom". Approximately in the middle of the first 9-years cycle there was the first "top". Not far away from the middle of the second 9-years cycle (i.e. now) the market achieved the second "top". These two tops together make a "double top" of the bigger size, in a scale of 18-years cycle. All these factors almost perfectly suit the Hurst cycles methodic.
Forecast for the nearest future
All things considered, we can make an assumption that:
- During the next year a weak growth is possible (if any will happen at all). This growth shouldn't lead to a new maximum "top". It will be just a second "top" of the 9-years cycle.
- Right until 2020 the two options are possible:
- An immediate market crash with an expected "bottom" in the 2020 (followed by growth);
- In case there are factors, which will restrain the market from falling, market will stabilize and untill 2020 the "sideways movement" or market stagnation is expected. The growth will not begin until 2020 anyways.
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