When The Desert Speaks: Part-1

Today I would like to write about UAE, the land which has a diverse and multicultural society with large expatriate population. In my 3 months of tenure at Dubai I have seen variety of things like Skyscraper, belly dancing, malls, auto fests and sand storm.......which has invigorate me to write about UAE.

Some of Key findings of UAE:

• Full name: United Arab Emirates
• Population: 4.8 million (UN, 2010)
• Government Type: Federation with specified powers delegated to the UAE federal government and other powers reserved to member emirates
• Head of state: President Khalifa bin Zayed Al-Nuhayyan
• Head of government: Prime Minister Muhammad Bin Rashid Al-Maktum
• Capital: Abu Dhabi
• Largest city: Dubai
• Per capita GDP: $38,900
• Population: 19%Emiratis, 81% Foreigner
• Major Export: crude oil(45%), natural gas, dried fish and dates
• Major Imports: Machinery and transport equipment, chemicals and food.
• Area: 77,700 sq km (30,000 sq miles)
• Major language: Arabic
• Major religion: Islam. 95% muslims, 5% others
• Life expectancy: 77 years (men), 79 years (women)
• Internet domain: .ae
• International dialling code: +971
• Border: Sharing land borders of 867 km with Oman and Saudi Arabia
• Sea Border: Sharing sea borders of 1318Km with Iraq, Kuwait, Bahrain, Qatar and Iran
• States: It consists of seven emirates, which are Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain
• Unemployment rate: 4.2%
• Inflation : 3.9%

Political Analysis:

• Strong implementation of policies, but relations with Iran over disputed Gulf islands, remain problematic.
• Nuclear deal with the US.
• Improving foreign relationship will increase growth in business.
• Absence of democracy may become an issue.

Economy & Business:

• The UAE economy contracted by 0.7% in 2009. The economy is expected to expand by 1.3% in 2010. Bilateral trade between UAE and china can give further growth opportunity to UAE. As per prediction two country will trade around $100billion by 2015.

• The UAE has high quality infrastructure; however, restrictions remain for foreign investors.

UAE has present itself as business friendly nation and it does not levied any tax on capital gain or salaries and corporate has shown immense interest for corporate relocation and investment. Free trade zones have also been legalized in multiple locations to reduce trade laws and allow new markets to take hold. However, foreign investors do not receive the same treatment as national companies. Complete foreign ownership is restricted under the country’s laws. At least 51% of a business must be owned by a UAE national, and projects must be managed by a UAE national or have a board of directors with a majority of UAE nationals. This restrictions affects the FDI Inflow of country.


While the country has a strong market for telecom related services, its poor level of science education is a problem.

The UAE has a high mobile penetration rate of more than 212 mobiles for 100 people. Till 2008, Etisalat is the only player and there was a monopoly in the market. Du just entered in 2008 and in a year it has market of 15%. Even though having high penetration of mobiles the level of education system is hinders the growth of mobile segment. Due to liberalized labor policies, the country has a skilled workforce from all parts of the globe. Dubai has seen a major rise in the influx of foreign labor due to the growth opportunity in UAE.

In 1^st part of “when The Desert Speaks” I have touched some of the aspect of UAE. In my second part I will do the PESTEL analysis of UAE to find more about mysterious desert land. C

Rating Stocks : A summary

We are always fascinated with rating things around us. Ratings give an overview that helps us in making critical decisions. In finance while dealing with stocks we use rating systems to help stakeholder’s in deciding their future actions. A Rating system may be three-tiered: "overweight", "equal weight" and "underweight", or five-tiered: "buy," "overweight," "hold," "underweight," and "sell".

On Suggestion Of Siddarth,Making language crispier 
The whole story below can be further summarized as:
Buy: You should Buy the stocks
Overweight : I will suggest you to Buy the stocks
Equal Weight : I cant suggest you anything actually
Underweight: It's not a good proposition, My advice will be to sell the stocks
Sell : You should sell the stocks

For details and better understanding, Read Further

The term underweight has been defined as a situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's weight in the underlying benchmark portfolio. This often occurs when a portfolio is actively managed and under weighting a security may allow the portfolio manager to achieve returns greater than that of the benchmark.
If a stock is deemed "underweight" the analyst is saying they consider that the investor should reduce their holding, so that it should "weigh" less. For example, if an investor has 10% of their stocks in Retail, 25% in Manufacturing, 50% in Hi-Tech, and 15% in Defence, and the broker says that Retail is "underweight", then they are implying that a smaller percentage of the stocks should be in Retail.

The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

The term overweight has been defined as a situation where a portfolio holds an excess amount of a particular security when compared to the security's weight in the underlying benchmark portfolio. Actively managed portfolios will make a security overweight when doing so will allow the portfolio to achieve excess returns.

Overweight is an over sophisticated method of saying 'buy'. It gets its roots from portfolio allocation theory, which theorizes that you can increase your return and decrease your risk by allocating your assets among various types of assets. Investment advisers have usurped the term to make themselves become sophisticated investment advisers in tune with the latest buzz words so to speak.
If a stock is recommended to be "overweight", the analyst opines that the stock is a better value for money than others. For example, an investor holds 15% of his/her investment in Technology stocks then, the investor's stock portfolio is 5% overweight in Technology stocks. Suppose further that the investor is advised by his broker or financial advisor that Technology should be "overweight" then, the investor is being advised to hold more investments in Technology, as a percentage, than the weight of that asset in the index/market. i.e., more than 10% by value of Technology shares in this example.

A type of weighting that gives the same weight, or importance, to each stock in a portfolio or index fund. The smallest companies are given equal weight to the largest companies in an equal-weight index fund or portfolio. This allows all of the companies to be considered on an even playing field.

The Rydex S&P Equal Weight Exchange Traded Fund, for example, provides the same exposure to the smallest companies in the S&P 500 as it does to corporate giants such as General Electric and Exxon.
Equal weighting differs from the weighting method more commonly-used by funds and portfolios in which stocks are weighted based on their market capitalizations. Equal-weighted index funds tend to have higher stock turnover than market-cap weighted index funds and, as a result, they usually have higher trading costs.

Carrying forward the above example will mean in case of equal weight the broker advises that Technology should be "equal weight" in which case, the recommendation is to hold 10% by value of Technology shares.

Buy and sell are stronger word than overweight and underweight. Buy has an exact definitions varying by brokerage, but in general this rating is better than neutral but worse than strong buy. Same goes for sell whose exact definitions vary by brokerage, but this rating is generally worse than neutral, but better than strong sell.