INTERNATIONAL.“Double-Dip concerns everywhere,” is the title of Credit Suisse’s research daily as of August 25. News spreading during the summer has been in fact less than encouraging.
U. S. Home sales plummeted 27% in July to an annual rate of 3.83 million units, the lowest sales pace since the National Association of Realtors began tracking the figure in 1999. Volatile stock markets along with fickle oil prices are the result, and, in addition, the Dollar fell to 15-year low against the Yen.
Nevertheless, a number of stock markets in East Asia achieved positive rate of returns. The Dow Jones Islamic Market Index (DJIM) Malaysia surged 2.34%, closing at 1,494.29 (as of the close of trading of August 24).
The East-Asian “tiger” state is also on a year-to-date performance track to be a top index (up 12.77%). The second and third leading composites were the DJIM Thailand Index (gaining 1.68% at 1,620.90) and the DJIM Taiwan Index (up 1.62% at 4,243.04).
“East Asia is picking up much more rapidly than other regions”, says Didier Duret, Chief Investment Officer for ABN Amro Private Banking in Geneva, who overlooks a growing base of wealthy clients in the region. The mostly Muslim nation of Malaysia learned from the Asian crisis in 1997/1998 and diversified its economy, seeking at the same time new trade partners in the Middle East.
According to the Islamic bank, Kuwait Finance House (KFH), Malaysia also accounts for 60.5% of global Islamic bonds - or Sukuk - issuances during the first half of 2010. This number reached US$16.4 billion, a growth of 116.4% compared to the first half of 2009.
The DJ Citigroup Sukuk Index added one percent in August, finishing at 123.28. Sukuk issuances do not pay in interest because they are forbidden - or haram - under Islamic law (Shari'ah). Instead, they pay a profit share. This number could reach US$30 billion this year, the KFH report says.
Conventional bonds in the West are currently facing massive capital inflows but they offer little return. According to Swiss bank Zürcher Kantonalbank (ZKB)," the bond markets already point to a double-dip of the global economy while fickle stock markets reflect hopes that the world “might get through by all means."
But the home sales figures weighed on the equity sentiment, as the US bellwether index, Dow Jones Industrial Average (down 4.07% at 10,428.05) shows. The DJIM U. S. Titans 50 Index declined by 3.88% to 1,917.57, the second largest fall.
Natural and man-made disasters such as the Iceland volcano ash cloud in April this year and the oil-spill in the Gulf of Mexico dragged the global recovery down. The massive flooding in parts of China and Pakistan was the latest bad news. Consequently, the DJIM Pakistan Index posted the largest decline last month, ending 4.89% lower at 11,414.31.
All DJIM industry sector indexes landed in the red. Despite a temporary oil price spike, the DJIM Oil and Gas Index was one of the worst performing composites, down 4.62% monthly and down13.92% year-to-date. The DJIM Basic Materials index (off 1.17%) might indicate the generally dreaded cooling of the Chinese economy.
“Fears of a double-dip recession can trigger significant price swings in precious metals as we have seen over the past few days,” the Credit Suisse research report says. However, the study adds, “We think that the low interest rate environment which is likely to persist amid these economic concerns will ultimately push precious metals prices higher.”
Hopes and fears are going hand and hand in global markets. As autumn approaches, which is regarded as a tricky period, major upturns at equity market might not happen too soon and fears of a crash will dominate.
Note. Gérard Al-Fil is a financial journalist in Dubai. He works as a Middle Eastern correspondent for the Swiss financial website moneycab.com, for Dubai-based portal AME Info, for the Swiss banking magazine 'Schweizer Bank' and for the German weekly 'Euro am Sonntag'. He reported from the UAE, Kuwait, Bahrain, Qatar, Oman, Turkey, Iran and China. Gérard holds a diploma in business administration from University of Duesseldorf and a post-graduate diploma from the Institute of Islamic Banking and Insurance (IIBI) in London.