Last year was a bumpy ride for the UAE stock markets. Dubai Financial Market lost more than two thirds of its value, while the Abu Dhabi Securities Exchange shed about half of its value in 2008. This has happened despite economic growth forecast for 2009.
Emirates Business spoke to four senior market-watchers about the reasons of the fall and what the new year holds for the stock markets and investors of the UAE. The experts are Mohammed Ali Yasin, Chief Executive, Shuaa Securities; Robert McKinnon, Managing Director of Equity Research, Al Mal Capital; Sanyalaksna Manibhandu, Head of Research, Emaar Saudi Financial Services; and Wadah Al Taha, Senior Financial Analyst.
The UAE stock markets have suffered a catastrophic 2008, with the DFM losing more than two thirds of its value. Why have they done so badly when the economy continues to grow?
YASIN: The UAE economy has really been a victim of its own success in terms of attracting foreign investment, especially into real estate, securities (equities and bonds) and banking, in the latter part of 2007 and early 2008.
By the end of the second quarter of 2008 there was about Dh190 billion of foreign money invested in local banks as per Central Bank reports. But when the global crisis blew up, most of this money was withdrawn to cover leverage and other liabilities in the foreign investors' home countries. Because foreigners had become major players, they left a huge hole that local investors have struggled to fill.
The UAE and Qatar stock markets have been the hardest hit because they were the most open to foreign institutions. Fundamentally, the performance of companies has been good, but the withdrawal of foreign cash has led to tumbling share prices, which did not reflect the fundamental valuations of those companies.
A correction in the real estate sector, which was something people had feared for a long time, became apparent in July and has added pressure to the financial system. People have installment payments to make and with banks no longer lending and real estate secondary market sales collapsing, stock markets have been the only liquid financial instrument that investors had access to, so they've sold shares to cover other liabilities.
MCKINNON: The reason for the poor performance of the stock markets, even as the economy continues to grow, is that the bourses are attempting to discount future risk and the outlook for economic growth in the region has diminished significantly in light of lower oil prices and the global credit crisis.
Valuations became over-extended in the previous period. There was a frenzy from local and foreign investors, especially for real estate stocks that pushed valuations up. It is typical for markets to overshoot on the way up and on the way down. Dubai's problem is that there is not much breadth in the market, with very few sectors for people to invest in. Typically, the drivers of the next bull market will not be the sectors that led the market before or were hardest hit on the way down. For the past five years, real estate and banking have led the way and there are not really any other alternative leaders. That is why I do not see the market launching an 'over-sold' rally. It will be difficult for real estate stocks, in particular, to attract interest in the current environment.
MANIBHANDU: We at Emaar Saudi FS see various reasons for the poor performance of the DFM, and to a lesser extent the ADX, during 2008.
Few portfolio investors realised, until September, the degree of dependence of UAE banks on short-term interbank funding. When hot money that was funding the interbank market was repatriated when it became clear in mid 2008 the dirhams would not be re-valued any time soon and inter-bank lending became restricted, portfolio investors realised with a shock the local credit market was not immune from the global credit crisis.
Seizure in the UAE interbank market that began in 2Q08 probably brought forward the ongoing correction in the property sector in both Dubai and Abu Dhabi. The equity market, including ourselves, had anticipated a property slowdown to emerge sometime in 2010. In that given scenario UAE equity investors would have begun to price-in a property sector slowdown in 2009. As it turned out, equity investors are pricing-in the clear and present danger on the rest of the economy of a banking and property slowdown in the UAE that could extend from 3Q08 until at least this year.
Equities in Dubai have performed worse than in Abu Dhabi for two powerful reasons. First, Dubai has been dogged since 1Q08 by news of ongoing police investigation into the alleged breach of fiduciary duties of top management of listed companies. Second, Dubai public and private sector entities are known to have financially levered up since the start of the property boom in 2002 as a means to expand. With the credit crisis hitting the UAE financial sector, geared-up entities are seen as more vulnerable to slower growth going forward than entities that have relied on retained earnings and equity for funding business expansion.
While the UAE real GDP is expected to continue to expand in 2009 and 2010 despite the global slowdown, the annual rate of real GDP growth in the coming two years is likely to be only about half of the rate of growth in 2008 (about seven per cent). Decelerating real GDP growth implies decelerating corporate profit momentum, rendering equities relatively less attractive than less risky assets, especially fixed income instruments.
AL TAHA: All the GCC financial markets have suffered a lot during 2008. This decline is an overreaction and unjustified and does not match the fundamentals of the economies, mainly in the UAE. If we concentrate on the UAE, I think a combination of factors have contributed differently during the second half of the year. The main factors are:
First, a lack of investment culture among all investor categories. This caused people to follow the lead of foreign funds, which were only a significant part of the market for a short time. They also tracked the international markets for weeks on end to create an artificial correlation between the US exchanges and the UAE markets, particularly Dubai.
The extensive liquidation and temporary migration of investments has caused a liquidity gap. The Central Bank has identified this gap, but the response was relatively slow. As a consequence, many banks have suffered from a lack of liquidity.
The equity markets also became a source of liquidity for those investors who were desperate for cash. Such a situation saw non-performance related factors contribute and exacerbate a catastrophic decline in local equities.
There has also been a lack of transparency and action to ease investors' worries.
The most important move was to guarantee deposits, while some other related parties made zero contribution to fighting the crisis.
The additional confusion came from the real estate sector, with two factors negatively affecting it. The first was the lack of liquidity, which almost killed the financing sector, while the second was the start of an expected correction, mainly in Dubai. The decline in this sector has triggered additional fears in the markets.
Poor contract design for margin trading between banks and their clients, as well as inappropriately timed stop loss and margin calls also contributed to the stock market downturn.
What can investors learn from this decline?
YASIN: The most important thing investors need to learn is to not over-leverage themselves and that booms cannot last forever. People need to rethink their financial position and not spread themselves so thinly.
This crisis is of historical proportions and the financial system will not be the same again, with cash much harder to come by. The crisis will affect the UAE and the GCC economies for the next couple of years and the stock market will be no different.
MCKINNON: Investors have to learn to be critical of all investments. There is a tendency to buy without knowing exactly what a company does, what its capital structure is like and so on. While prices are going up, investors seem to buy whatever their friends are buying, but they will need to be more critical in the future. Hopefully, they will learn to pay attention to indicators such as price to earnings ratios. During a bull run, investors believe that this time it will be different and that the spectacular growth is going to continue for 10 or 20 years, but in reality the economy will always be cyclical.
MANIBHANDU: The sharp decline in UAE stock prices, especially in 2H08, has shown up the DFM and the ADX for what they are: equity markets dominated by finance- and property-related companies. Telcos, transportation and energy stocks on the DFM and ADX are either not big enough in market cap terms or do not attract sufficient trading liquidity to act as safe havens for portfolio investors during stock market tempest. Etisalat and Taqa, moreover, are not accessible to foreign portfolio investors.
Given the dominance of finance- and property-related stocks on the UAE equity exchanges, the lesson local investors might be learning is the need to switch from overweight to nil weight in equities, which adds to stock market volatility and risk profile. The lack of investing opportunities outside of finance and property related sectors on the ADX and DFM and the experience of sharp falls in stock prices in 2008 could put off many portfolio investors from UAE equities for quarters to come. Foreign investors who do invest in UAE equities could take the experience gleaned in 2008 to emphasise trading on the ADX and DFM, as opposed to investing for the long term, in future.
AL TAHA: It has been very costly and harmful for both the investors and the national economy. We must first gain the confidence of investors to earn their trust in the market. This major role must be played by a governmental or semi-governmental body in an ethical, professional and continuous manner.
What can the authorities do to help the market recover some of these losses? Should banks play a larger or more positive role in this scenario?
YASIN: The Government has taken the right steps in terms of the macroeconomic picture by supporting banks and guaranteeing deposits. The latter ensured there wasn't a flight of capital from the local banking system.
However, the next stage is to make sure banks go back to playing their main role of financing and start lending to the private sector again, otherwise we may see businesses folding, as some will not have the stamina to last the credit crunch much further.
Already, we're seeing layoffs between 10 per cent and 30 per cent in various sectors, with real-estate and financial sectors worse hit. This must be done in a calm and orderly manner, because if redundancies are too big or too rapid it will result in major loss of human capital which will be much harder to regain and attract back once the economic cycle turns.
The UAE stock market historically had leaders in every cycle leading that rise. The stock markets are looking for a party to lead it out of this cycle. Previously, in 2007, it was foreign institutions and before that in 2005 it was GCC investors, particularly from Saudi Arabia, who took over the mantle from local high net-worth investors who led it before that. None of these three groups are willing to lead at present, so a government or quasi-government fund should be created to invest in the market and lead the way for others to follow. There is value in investing in the market and good opportunities for long-term investors to slowly accumulate.
We are likely to see some very bad numbers in the fourth quarter results, but these still won't be enough to justify the huge declines on the stock markets this year – company profits are not going to fall 70 per cent year-on-year.
The UAE authorities should not license financial institutions, whether they are foreign or local, or whether they operate
on-shore, in the DIFC, or abroad, without having the ability to regulate their practices.
We have seen synthetic short selling of UAE stocks on the books of investment banks through their international offices all over the world, although this practice is prohibited by the UAE Securities and Commodities Authority and the ADX and DFM – if the authorities can't regulate these actions, then these institutions shouldn't be licensed.
Currently, institutions can juggle their commitments between their various offices to evade the authorities' jurisdiction, and each authority assumes that the other one is regulating the entities illegal products offering, which could lead us into a similar situation like the US has experienced where there's a breakdown in regulation monitoring, of their securitised real-estate backed offerings which led to the credit crunch crisis we're living.
MCKINNON: I believe there is very little the authorities can do to recover losses. The markets may be oversold in the short term and the government could temporarily support prices, but eventually the market will find the proper price level, whatever interim steps are taken.
The focus from the authorities should be on improving the future investment environment. Issues such as transparency of corporate reporting and diversity of the market should be addressed sooner rather than later.
There should be more transparency from the exchanges, regulators and companies, while minority investors should be given more rights, which will help the situation going forward.
The banks will need to expand lending for the UAE to get through this difficult time. However, there is little incentive in the current environment, given the substantial risks to the global economy. I expect that the local banks will pick up activity once concerns about the global economy begin to calm.
MANIBHANDU: ADX and DFM management and SCA could help the equity market recover and promote portfolio investing in equities as a form of savings in the UAE by encouraging listed companies to disclose information to portfolio investors and equity investment analysts on a regular and timely basis. As a case in point, banks and financial institutions only spoke about the lack of liquidity they were facing from second quarter 2008 only in late third quarter of the same year. The investor relations departments of banks could have alerted investors and analysts to tight interbank conditions earlier than in September 2008.
As financial intermediaries playing a larger or more positive role in the scenario, we are of the view lenders should be guided by (1) prudential standards as laid down by the Central Bank and (2) commitment to boost shareholder value when they consider lending to an economic sector or to a borrower. Banks should lend to borrowers for investing in the equity market when it makes business sense subject to regulatory standards and not simply for the purpose of propping up a particular economic sector.
AL TAHA: Banks should realise that they have not paid enough attention to the contracts with their clients regarding the margin trading. Banks should not generalise rules in such cases, they must analyse the capability of each client. Many clients were given facilities much more than their capabilities.
The most important thing the banks should concentrate upon now is to maintain and enhance the trust of their clients. A plan must be put in place for this matter to be implemented immediately.
The crisis in developed economies has also hit the Gulf, with oil plunging from a record high of $147 per barrel in early July to less than $40 today, severely hitting state revenues in the Gulf. What effect will this have on UAE and regional stock markets?
YASIN: The GCC economies rely on oil. However, the UAE has been able to diversify much better than the rest of the region. In 2000 to 2001, oil dropped to around $10 a barrel, but the UAE was able to use its cash reserves and other invested funds across the world to compensate the drop in oil revenues and continue its economic expansion. The economy has grown exponentially since then, so the Government won't be able to do exactly the same this time around, but if oil stays above $40 a barrel it will be able to finance most of its infrastructure and development projects.
The most difficult time will be in the next three to six months, which will see high volatility in oil prices as the market deleverages, and until the demand-supply return to be the controlling factor of oil price movements and not the speculators in the international markets.
MCKINNON: Falling oil prices will first of all affect government budgets. At some point, we could potentially start to see some of the regional governments going into deficit. That's fine because they've been running surpluses for the past five years or so, but it will impact consumption.
Lower oil revenues should help to slow down inflation, which had really started to pressure the regional economies. We may begin to see infrastructure spending postponed or spread over a longer time period.
In terms of the stock markets, it will filter through to corporate earnings and general consumption and so will slow down any stock recovery. I don't see stocks returning to their boom prices of late 2007 and early 2008.
Most of the decline in oil prices is priced into equity markets at current levels. However, if oil prices do decline further it would have a negative impact. The potential for a positive impact from rising oil prices in the second half of next year exists and I think the latter is more likely scenario.
MANIBHANDU: The rapid plunge in oil prices implies there would be less liquidity in the financial market for equity investing than when crude prices were on the rise.
AL TAHA: I think we have to look at this from a wider perspective. First, we should not consider the $147 price as the healthiest situation for us. For the oil producing countries, high price levels will lead to imported inflation due to cost-push-inflationary pressures created in the industrialised countries.
Second, high oil prices normally weaken the US dollar and most GCC currencies are pegged to the greenback. On the other hand, lower prices will see many alternative energy projects cancelled or frozen because they're no longer competitive.
This will keep the oil producing countries in control, while also allowing them time to work on developing other sources of income. The surplus created from the previous boom will keep the UAE in a healthy situation. Some mega infrastructure projects will need to be delayed as a precautionary measure if oil goes below $40, but I do not think this sort of price would remain for a long period. In my opinion, with a targeted price of $70-$80, Opec must be committed to reducing the production to avoid building cheap inventories and to have better price levels, non-Opec also must be convinced to adopt a rational production policy
Turnover has slumped alarmingly, with combined trading on the two domestic exchanges poised to fall year-on-year. How can local investors – both retail and institutional – be convinced to return to the market?
YASIN: 2008 has been an interesting year in terms of turnover. January was the best month, with trading worth more than Dh100bn, but by November this had dwindled to Dh17.5bn.
The average trading value over the past three months has been dropped to below Dh30bn per month and I expect this to continue into early 2009, with total trading this year likely to reach approximately Dh360bn to Dh380bn, which would be a decline of nearly 30 per cent on 2008 total value traded.
2009 could be the reverse of 2008, with a slow start giving way to stronger trading in the second half of the year.
Banks will probably start lending slowly from February, while long-term institutional investors who buy on value are likely to wait until the first quarter results are announced before moving into the market, which means they will wait till April/May time-frame.
The key is for banks to start lending to businesses again. Then the latter will be able to invest any excess money into stocks, safe in the knowledge they have access to bank finance.
There will be volatility in international markets and so foreign investors will continue to focus on events closer home.
MCKINNON: There are two key issues the authorities need to address. The first is to increase the breadth of the market by encouraging companies outside real estate and banking to list.
There needs to be more options for investors, especially in the UAE. Foreign investors require more diversity to better manage risk.
Transparency is the second issue. Regulations must improve because at the moment minority shareholders don't really have any say in the running of companies. That really deters interest from the investment community.
Some companies are better than others and a lot have to improve greatly.
A lack of transparency means that investors become sceptical about a company's statements. When the situation turns bad, many companies simply stop communicating and so institutional investors start to price in the worst-case scenario. That's what we are seeing right now.
There are some difficult times to come in the real estate sector, but stocks have been oversold because the lack of sufficient company disclosures means investors fear the worst.
MANIBHANDU: There is a case for suggesting stock market trading value is a leading anti-cyclical indicator.
For instance, trading values on the DFM peaked in November 2007 portending a correction that began on the DFM in particular in mid January 2008. On the positive side, persisting declining traded values could imply the markets is in its late stage of correction and poised to begin a sustainable recovery.
Both retail and institutional investors are likely to be more inclined to look at indicators other than trading values to help them decide on portfolio investment in equities. The steepness of the fall in stock prices in the UAE in 2H08 could have positive implications for company valuation.
Measures introduced by government such as the merging mortgage banks and folding them into federal banks as a means of ensuring the property sector is supported by funding would at some point help to attract portfolio investors back to the DFM and ADX.
AL TAHA: Two main actions can accelerate the investors' return. First, a government or a semi-government fund should enter the market to support stocks, not as a charity, but for the long term to stabilise the market and end reduce the current tension and hesitation.
Such action is not against the free market as many people claim, it is a strong message to the investors that the government believes there's a good opportunity to invest based on the main economic fundamentals. GDP growth will remain positive in 2009, while many big countries will have zero or negative growth. It is expected that the inflation rate will fall.
Second, the listed companies must play a proactive role in transparency and disclosure and take all necessary actions to gain the trust of its shareholders. The implementation of the corporate governance is a big challenge for them, which will have to be met successfully.
Will foreign funds return in force in 2009?
YASIN: I doubt foreign investors will return in numbers in the first half of 2009 and they won't be a substantial presence until 2010.
The launch of derivatives on the Nasdaq Dubai will boost liquidity on the stock markets because investors will have to provide some backing for their futures contracts, however, we have to wait and see whether this will be made available to all types of investors or just the chosen few institutions, keeping the retail investors in the dark.
MCKINNON: Foreign funds probably will not be the major drivers of recovery in local markets. I would expect them to come back after the initial recovery phase. It is typical in emerging markets for foreign investment to follow returns.
Foreign funds could return towards the end of 2009, but right now they're facing problems in their home markets, such as redemptions.
Global markets may start to improve in the second half of next year, which should encourage overseas investors to return to the UAE, but not on the scale we saw in late 2007. That's highly unlikely until at least 2010.
MANIBHANDU: Foreign funds would return to UAE equities in force in two scenarios.
First, if foreign investors believe there could be a move to re-align the dirham and other GCC currencies ahead of a monetary union in 2010, there would be a sharp inflow of foreign funds into the UAE financial system. Some of the inflow of funds speculating on currency re-alignment would find their way into the UAE equity markets.
At the present juncture central bank officials across the GCC have played down the possibility of a revaluation of Gulf currencies against the dollar ahead of monetary union.
Second, foreign investors would re-allocate assets to the UAE as part of a re-weighting of assets in emerging markets. We do not see such positive re-allocation to emerging market assets until 2H09, at the earliest.
AL TAHA: Most likely no, the global crisis in the world will continue to badly hit the United States, plus Europe to a lesser degree.
What we should consider is the redirection of investments through a complete integrated reallocation strategy in light of the global changes.
I believe reallocation strategies, if adopted by the high net worth individuals, will have a significant positive impact on GCC markets, which have a lot of potential to from the current levels.
In the current tough climate, the IPO pipeline has all but dried up. Do you see many companies being brave enough to float next year? With credit conditions tight, what other funding options do companies have?
YASIN: Many companies are waiting for market conditions to improve before launching IPOs.
We will have to see whether banks will provide more realistic leveraging of say two or three times to one, rather than 100 to one like in the past which lead to un-realistic numbers of over subscription.
There's a chance we could see five IPOs, with the first being the most difficult and unlikely to be launched until the middle of the year. These IPOs should come from new sectors not yet much represented on the markets to add diversity. Our markets are still young and require more depth. IPOs must be priced more realistically to reflect the decline in share values.
They can't use price to earnings ratios of 15 to 20 times anymore.
If you look at the market, the most liquid stocks are the ones who have listed in the last few years.
Shareholders in the likes of Mashreq shares for example or some insurance companies, are stuck with their holdings and banks will become more reluctant to accept portfolios that include illiquid stocks as collateral from margin traders.
MCKINNON: The authorities should do more to encourage a more diverse range of companies to list and that includes altering the requirements for family businesses to go public.
I don't expect any IPOs in the first half of the year.
Already, a lot of IPOs in the pipeline have been scrapped or postponed, with things unlikely to pick up until 2010.
At the moment we are seeing interest from private equity as a funding source, but the valuation has to be very attractive.
MANIBHANDU: The IPO flow in the UAE since mid 2006 has disappointed, even when the going was good. We have heard more than once the potential for Emirate Post, Dubai Aluminium and Emirates among to privatise via IPO's, which has not yet happened. Of private sector IPO's, there was talk some 18 months ago of minimum listing rules being lowered in order to attract family companies. The minimum listing level has been lowered, but no family company has launched an IPO.
The public sector needs to show the way and list companies that are not related to finance and property to help develop the capital markets in the UAE, in terms of broadening the sectors that are represented on the ADX and DFM.
The private sector is unlikely to want to launch an IPO while market conditions are unfavourable.
As alternatives to bank borrowing, established corporate names should regain access to equity (IPO or SPO) and debt capital (conventional and sukuk) markets sometime in 2009.
We would not rule out further mergers under government guidance, along the lines of Amlak and Tamweel with the two federal banks, in 2009 as a means to solve funding problems.
AL TAHA: This subject is very big and contains a lot of details, but in general, the government can float some of icon companies in both Dubai and Abu Dhabi.
My advice to unknown or little known companies is to wait and watch during the first half of 2009 before opting to go for an IPO.
Stocks to watch
Can you name the three stocks to watch in 2009?
YASIN: Emaar Properties has a track record of delivering projects and its current market cap of around Dh18.5 billion is below the value of its Burj Dubai development alone, let alone the rest of its projects.
Etisalat is on our radar because in times of crisis, people tend to talk more on the phone, not less, and etisalat is continuing to grow at 18 per cent to 20 per cent per year, year-on-year, despite du taking around a 30 per cent of the mobile phones market share.
Sorouh Real Estate is at the heart of Abu Dhabi's strategic development plan. The same is true for Aldar, but Sorouh does not include project revaluations in its profits and so it looks to be in a stronger position going forward. Government-backed companies will provide the creditability investors need.
MCKINNON: Agthia is a small and well-managed consumer staples company from Abu Dhabi. This sector should have a more stable revenue stream. Aramex's revenues should decline somewhat as business activity slows, but lower energy and transportation costs could offset the slowdown in revenues. It also has a stable cash flow, which should be a key factor for investors next year.
Etisalat's strong cash-flow generation should offer investors stability in a difficult economy, while the company is also investing in high-growth markets abroad. So investors can get good earnings growth and stable revenues at the same time.
MANIBHANDU: We would watch Aldar, Arabtec and DFM in 2009.
What is your 2009 outlook for both the UAE stock markets?
YASIN: The year will start slowly, with low volumes continuing. The markets are likely to pick up in the second half of 2009 and I think they can put on between 20 per cent and 25 per cent. If the turmoil in the global economy abates, it could be even higher than that, but we have to be conservative and adopt a wait-and-see approach.
MCKINNON: In the current environment we favour the ADX over the DFM because of the fundamental support of the Abu Dhabi Government and its oil revenues. There is less certainty surrounding the Dubai economy. Abu Dhabi offers more opportunity for investors, but both markets have been oversold and will remain within the current range for the next six to eight months. There should be a global equity rally in the second half of 2009 and this will see Abu Dhabi out perform Dubai.
MANIBHANDU: In the UAE context, financial sector liquidity is likely the key driver of equity market performance. The surge in the DFM over 4Q07 and the plunge on the market over 2H08 was driven by glut and scarcity in the financial system liquidity, respectively. In turn, financial sector liquidity was boosted by increasing revenues from crude and hot money speculating on currency re-alignment since the start of 2004.
Portfolio investors' perception of UAE equities as an attractive asset class in terms of delivering relatively superior returns per a unit of risk has likely served as a secondary reason to surplus financial system liquidity for buying stocks on the ADX and DFM in the past. Perception equities were more attractive than other asset classes, usually property in the UAE context. These drove the ADX and DFM in the bull run of 2004-2005. We at Emaar Saudi FS expect both the ADX and DFM to stage some sort of recovery over the course of 2009. With the global financial system likely to continue to be short of surplus liquidity over most of next year, it could be that local portfolio investors consider equities as relatively more attractive than property investments. This will bring buyers back to the ADX and DFM.
Over 1Q09, listed companies would be publishing 4Q08 trading statements and sharing with portfolio investors their outlook for 2009 and announcing dividend payments from 2008 operations. With 2008 operations behind them, it should become easier for portfolio investors and analysts to assess the extent of the slowdown and value stocks. It would become increasingly clear over 2009 that at least some UAE equities were trading at lower valuations than they should be.
There is no doubt that the UAE macro and corporate outlook for 2009-2010 would represent a slowdown on macro and corporate performance achieved in 2007-2008. And although some macro and micro uncertainties could lift over 1H09, equity investors would still be looking at a range of scenarios.
In consequence, we do not believe any recovery in 1H09 would go very far. As an indication, the DFMGI might range between minus five and positive 15 per cent of 2008 year-end close in 1H09.
AL TAHA: There is a big possibility the ADX will recover faster than the DFM, while the volatility of DFM is higher, which makes it more risky. The ADX will continue to gain a rising percentage of the UAE's traded value.
Also, there is a big possibility the markets can recoup some of their losses. The recovery depends upon the supporting action I've mentioned. Portfolios will have a negative impact on the first quarter results of 2009.