Gulf stock markets - Lex Column (FT)

Egypt is not the only Middle Eastern country with a surfeit of pyramids. Structures to rival anything the pharaohs built have sprung up across Arabia, in the form of stock markets that have run well into "greatest fool" territory. Unlike their ancient counterparts, these ones have been thrown up in less than three years and will not withstand the test of time.

Examples of valuations that defy gravity - if not sanity - abound. One is Abu Dhabi National Energy, known as Taqa. In spite of having fallen by more than a quarter since it listed last month, the shares still trade on a price/earnings multiple of 64 times.

Surprisingly, Taqa is a utility, with earnings forecast to grow 7 per cent annually. Its European peers, offering 10 per cent growth, trade at 14 times. In Qatar, where economic prospects look good, foreign investors have not exactly rushed in since the Doha stock market was opened to them in April.

Retail ownership of more than 80 per cent, combined with patchy analyst coverage, means valuations more often rely on headlines rather than proper number-crunching.

For now, oil-derived liquidity makes calling the top tricky. But volatility is running at twice the rate of other emerging markets. A few more financial scandals, or an exogenous shock - something the region has long specialised in - could burst confidence even before oil prices moderate. The creation of such unsound structures is, sadly, an all-too-familiar sequence in oil-rich economies.