The sustained decline in Gulf equity markets due to falling oil prices has wiped out nearly $150 billion (Dh550.5 billion) since the end of October.
The trigger was the collapsing price of oil, which provides Gulf governments with the bulk of their revenues.
But it’s not just the falling oil price that has put pressure on Gulf markets. Some investors used heavy leverage, including bank loans, to buy stocks on the way up; they are now selling the stocks to cover the debt.
Another issue is the dominance of retail investors. They account for over 90 per cent of daily volume in Saudi Arabia, far more than the ratio in major markets elsewhere. Many focus on the short term rather than basing their decisions on long-term value, as institutional investors do. That can magnify moves.
Saudi Arabia's market, the biggest in the region, has sunk 25 per cent from its peak in September. Dubai is down 31 per cent.
Stocks competitively priced
Although the declines have left many stocks competitively priced by global standards, few people are willing to call a bottom for the markets just yet.
"Values are not the problem. The problem is that negative momentum has started," said Mohammed Ali Yasin, managing director of NBAD Securities, a top Abu Dhabi brokerage.
Real estate in Dubai healthier
In contrast to Gulf markets' crash during the global financial crisis in 2008, the current slide appears to be causing little stress in the rest of the financial system.
That is because real estate markets in Dubai and elsewhere looks much healthier. In addition, Gulf regulators have strengthened banks since the crisis.
So the stock market debacle has not pushed up credit default swaps prices or bond yields in the big Gulf economies. Currency spot markets show signs of money flowing out and forwards have moved, but not enough to suggest pressure on the countries' currency pegs to the dollar.
Except for Bahrain and Oman, where state finances are relatively weak, investors are probably wrong if they fear cheap oil will slash government spending - even if Brent crude stays near $60 a barrel.
At that level, most Gulf governments would run budget deficits next year, but their huge fiscal reserves would let them keep spending heavily for many years.
Dubai companies making money
Yasin said profits could still grow 10 to 15 per cent next year at many UAE banks, down slightly from this year but enough to make UAE markets attractive, given their lowered valuations.
On the trading floor of Dubai's biggest exchange last week, many retail investors agreed. They attributed Dubai's weakness to temporary factors: leveraged positions being cut, the suddenness of oil's drop, and initial public offers that drained funds from the market.
"It will rebound. All the companies are making money," said a local investor who identified himself as Mohammed.
But he and others were not sure what will halt the slide. Some look to Saudi Arabia's disclosing its 2015 budget around the end of December -- a big budget would comfort investors.
Another inflection point could come in January, when funds open their books for the new year, or in February, when many Gulf companies announce fourth-quarter earnings and the effect of lower oil prices will become clearer.
Hopes that Gulf authorities will intervene are probably misplaced -- they did not do so effectively in 2008. Kuwait has in the past used a state fund to support blue chips, but its market has been the GCC's worst-performing this year.