As GCC stocks tumble on falling oil and emerging market funds pull out, it is tempting to see nothing but doom and gloom for the regional economy.
The latest news on further falls in Asian and European stock markets suggests that markets have not yet reached the end of their negative run.
Chinas less than stellar economic figures have sent shockwaves through global financial markets. But analysts globally view the massive losses in both developed and emerging markets as an overreaction to a slight slowdown in China, where growth still outpaces most of the world.
Much off the sell-off is either a macro-decision by institutions to pull out of emerging markets, or caused by negative sentiments approaching panic. Funds are being moved into bond markets as investors look for a safe haven, but this will put pressure on yields.
Stocks have fallen across the board, with no regard for the fundamentals of either the companies or the wider economies. This will mean that there are plenty of opportunities for investors to make solid equity investments at lower prices, but oil prices will drag GCC markets down in the medium term.
So the real question is, as always, what will happen to oil prices? A slowdown in China would reduce demand for oil, putting further downwards pressure on prices.
If oil prices recover, GCC government spending will continue to support regional economies. If oil continues to fall to 1990s levels, the GCC may have to readjust its countercyclical spending plans. That would be a real reason to sell stocks in GCC companies.