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The Dubai Stock Market Index

Hi, Sunil here to talk about the Dubai stock market index

Why Dubai and not the entire Middle East?

Good question.

Because Dubai is the most developed (as of 2012 at least) and is covered in global news more than its neighbors, my focus has always been on the Dubai Financial Market Index (more below on this).

However, because this is an important business discussion, I will also discuss on the stock market indexes in UAE that give a good snapshot of the overall local economy and where the Middle East markets stand at any given point in time.

If you are a stock market investor like myself, you know how valuable indexes are.

In fact in early 2008 I made the decision that I would no longer invest individually in stocks and rather just in mutual funds and indexes.

(2012 Update: I have done very well with this strategy despite the economic slowdown)

The most popular index globally is the Down Jones Industrial Average in the United States.

This index was formed decades ago to give investors and even the common public an idea of the financial market health in the country.

An index is a basket of stocks from usually larger companies which are seen as the stable economic blocks of the economy. These shares are pulled together and their performances are tracked. When the index is up, the sentiment is generally positive and means the market is doing well.

In Dubai, and the Middle East in general, there was no such thing until very early in the 2000s. That is when the idea of a market index gained some discussion around it.

Later in the early 2000s, governing bodies formed few indexes as the financial markets continued to develop in Dubai and elsewhere.

This was a necessity to promote the stock market, encourage investing and give people an idea of where the local economy stands at any given point in time.

There are four of these popular and most widely used indexes as of 2008. Below is some background on each:

The Dubai Stock Market Index – Or the “Financial Market Index”

The bulk of my focus has been on this index. I view Dubai almost completely independe of the rest of the Middle East. There are many reasons for this but that is not what this article is about. This is the main stock market index in Dubai and is based on 40 or so stocks listed on the Dubai financial Market (as of 2008).

It is important to note that the number of stocks in an index “basket” is subject to change as companies grow, come and go. Most of the stocks in this index are local companies with a very small portion that are owned by foreign investors.

The Dow Jones Arabia Titans 50

Oh yeah, how can the Dow Jones not reach the Middle East???? This index is made up of about 50 stocks from all around the Middle Eastern region (not just Dubai). This was the first and original index that was a result of a join effort by the Dow Jones Index and the government run Dubai International Financial Centre (DIFC).

The companies that make this up are some of the largest, far reaching and reputable companies that have been around for a long time. Companies are often selected based on their market capitalization (share price multiplied by outstanding shares), which is a good indication of the companies size. Other factors like revenues (also called turnover in the Middle East) and income are considered.


The Tadawul All-Share Index (Saudi Arabia)

This one is based in Riyadh, Saudi Arabia and is often watched by investors because Saudi is arguably the most dominant country in the Middle East (because of the massive oil reserves that run this world). Just like when the USA sneezes and the world catches a fever, when the Tadawul Share Index dips, so does the Middle East (mostly at least).

The Abu Dhabi Securities General Index (Abu Dhabi)

Another honorary index that is watched by many. This one is based in Abu Dhabi, the capital of the UAE (some say by 2013 it will be the financial capital of the UAE as well, having overtaken Dubai by then). I will update you as I learn more.

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