The Middle East's oil-fuelled economies have stuttered in the past year but with oil prices rising from their earlier lows, the outlook is again promising.
The rise in prices is often attributed to China's oil-hungry economy and it is tempting to talk of a growing relationship between China and the Middle East built purely on oil.
But this would be wrong. True, China buys nearly a quarter of its daily oil consumption from the Middle East's oil producers, and in spite of China's best efforts to diversify its energy sources, the country's factories will grow increasingly reliant on huge oil fields in Iran, Kuwait and Saudi Arabia.
But the ties that bind China and the Middle East are more complex than suggested by the oil tankers steaming between Ras Tanura in Saudi Arabia and Guangzhou.
Trade between China and the Middle East has surged in the past few years. Oil is sent east, but almost as many consumer goods are sent west.
China's exports to the Middle East have surged to US$60 billion (Dh220.38bn) from $13bn in the past five years, and China has overtaken the US as the world's largest exporter to the Middle East.
In China, it is private entrepreneurs who are responsible for the growth in trade with the Middle East, rather than policy makers sitting in Beijing. One of the great myths about the Chinese economy is the importance of the government in driving reform. In truth, the country's policy makers are more likely to be following the lead of a dynamic private sector.
Yuan Chun is typical of these entrepreneurs. Mr Yuan sells porcelain from his small shop in Dubai. He used to sell blue porcelain to mainly US and European customers. But as demand dried up he quickly switched his stock and now sells mainly red porcelain to Middle-Eastern and African customers who have different tastes but continue to buy in spite of the crisis.
Private entrepreneurs from the Middle East also play an important role. Nearly 200,000 Middle-Eastern traders visit the Chinese coastal city of Yiwu annually, buying the type of cheap consumer goods that were once considered unaffordable in cities such as Egypt and Dubai. They find it easier to apply for visas to visit China than they do for either the US or Europe.
But while trade is flourishing, investment between the two regions is not. Chinese companies have mainly focused on commodity assets, such as Chinalco's recent attempt to buy a stake in Rio Tinto. In the Middle East, commodity assets are mainly in state hands and not for sale.
Moreover, even if a Chinese manufacturer is looking to invest abroad, he is more likely to target a factory in Germany than Kuwait.
Middle-Eastern investors face similar challenges when trying to invest in China. Their private equity funds have successfully acquired firms ranging from Malaysian banks to Pakistani telecoms. But it remains difficult, even rare, for foreign companies to acquire Chinese companies because of the difficulty in receiving official approval.
In this, Middle-Eastern investors face the same restrictions as other foreign investors.
So while trade between China and the Middle East is flourishing, it is too early to suggest that China is ready to supplant either the US or Europe as the Middle East's largest commercial partner.
But Dubai can only benefit. The emirate's economy has certainly suffered from the contraction in credit over the past year but like Hong Kong in 1997, Dubai is discovering that its future lies in intermediating trade, not building apartment blocks. And the emirate is more adapted to the flow of goods between China and the Middle East than it is adapted to credit.
Dubai's relative size also means that it takes just a small rise in the region's trade to have a large impact on the emirate's economy.
Dubai has achieved much in the past decade, but its $80bn economy is still smaller than those of many fast-growing Chinese cities, not just Beijing and Shanghai, but also Guangzhou, Chongqing, and Shenzhen.
And geography favours Dubai, with many Chinese companies viewing the emirate as a springboard into Africa. For instance, 37 per cent of Chinese exports are destined for North African countries. (The figure rises to 50 per cent if Nigeria is included to the list).
It makes more sense for a Chinese company to service these clients from Dubai than it does Johannesburg.
It is the opening of new trade corridors like this that best describe what strengthening relations between China and the Middle East truly mean for the region, and global economy.
One day, the flow of goods between Guangzhou, Dubai and Cairo might be as important as was the flow of goods between New York, Liverpool and Rotterdam.
Ben Simpfendorfer is the chief China economist for the Royal Bank of Scotland and author of The New Silk Road
Pox that threatens the Middle East's native species
Camelpox
Caused by a virus related to the one that causes human smallpox, camelpox typically causes fever, swelling of lymph nodes and skin lesions in camels aged over three, but the animal usually recovers after a month or so. Younger animals may develop a more acute form that causes internal lesions and diarrhoea, and is often fatal, especially when secondary infections result. It is found across the Middle East as well as in parts of Asia, Africa, Russia and India.
Falconpox
Falconpox can cause a variety of types of lesions, which can affect, for example, the eyelids, feet and the areas above and below the beak. It is a problem among captive falcons and is one of many types of avian pox or avipox diseases that together affect dozens of bird species across the world. Among the other forms are pigeonpox, turkeypox, starlingpox and canarypox. Avipox viruses are spread by mosquitoes and direct bird-to-bird contact.
Houbarapox
Houbarapox is, like falconpox, one of the many forms of avipox diseases. It exists in various forms, with a type that causes skin lesions being least likely to result in death. Other forms cause more severe lesions, including internal lesions, and are more likely to kill the bird, often because secondary infections develop. This summer the CVRL reported an outbreak of pox in houbaras after rains in spring led to an increase in mosquito numbers.
Sheer grandeur
The Owo building is 14 storeys high, seven of which are below ground, with the 30,000 square feet of amenities located subterranean, including a 16-seat private cinema, seven lounges, a gym, games room, treatment suites and bicycle storage.
A clear distinction between the residences and the Raffles hotel with the amenities operated separately.
Stage result
1. Jasper Philipsen (Bel) Alpecin-Fenix 4:42:34
2. Sam Bennett (Irl) Bora-Hansgrohe
3. Elia Viviani (Ita) Ineos Grenadiers
4. Dylan Groenewegen (Ned) BikeExchange-Jayco
5. Emils Liepins (Lat) Trek-Segafredo
6. Arnaud Demare (Fra) Groupama-FDJ
7. Max Kanter (Ger) Movistar Team
8. Olav Kooij (Ned) Jumbo-Visma
9. Tom Devriendt (Bel) Intermarché-Wanty-Gobert Matériaux
10. Pascal Ackermann (Ger) UAE Team Emirate
How Tesla’s price correction has hit fund managers
Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.
It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.
The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.
Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.
Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.
He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.
AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”
A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.
Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.
Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.
Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.
By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.
Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.
In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”
Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.
She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.
Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.
