Dubai's debt woes should be seen as an opportunity for Standard Chartered

There are two emotions that drive markets – fear and greed.

Standard Chartered

£15.20p

Questor says BUY

Greed has been in the driving seat for some time – but at the end of last week news from Dubai caused fear to re-emerge as the emotion controlling events.

Shares in Standard Chartered fell 6pc on Thursday, wiping about £1.8bn off its valuation. Investors are concerned that events in the emirate could set off a chain reaction across Asia.

However, Questor is along-term investor and regards the steep fall last week as a buying opportunity.

On Friday, Roy Ramos, an analyst at Goldman Sachs, said in a note to clients that Dubai's debt rescheduling will have a "manageable" impact. He estimated that credit losses at Standard Chartered could be $177m (£108m). "In a worst-case scenario, we expect a manageable impact at less than 1pc of equity, less than 5pc of net profits," he said.

Questor is not attempting to ignore the potential for continuing debt problems. Rather, it looks likely that the market reaction to the situation, particularly in terms of Standard Chartered shares, has been overdone.

Other stock pickers may use the events of last week to recommend staying away from Standard shares until the situation has more clarity. This is a legitimate view. But Questor believes that the best time to buy individual shares is when everyone else is afraid to do so – and that long-term investors should use these falls as a buy opportunity to top up their holdings.

Of course, last week's events really could be the start of new leg down in the financial crisis if contagion spreads through Asian markets. However, Questor's portfolio has been constructed on a defensive basis as the chance of a double-dip recession is very real.

The shares are trading on a December 2009 earnings multiple of 14.2 times, falling to 13 next year. They are yielding 2.7pc. Shares in Standard Chartered were recommended as a buy on April 6 at £12.40 and they are now up 22.5pc compared with a market up 31pc. Buy.

Petra Diamonds

63p

Questor says BUY

On Friday Petra Diamonds sold a 168 carat diamond from its Cullinan Mine for $6.28m (£3.83m) – or $37,380 a carat.

The Cullinan Mine, near Pretoria, South Africa, is famous for producing a 3,100 carat diamond in 1905 – with the two largest gems from this stone becoming centrepieces in the British crown jewels.

The diamond sold last week was recovered at about the same time as a 507.55 carat white stone, which is yet to be sold, and two diamonds of 58.50 and 53.30 carats, which were sold in November for a total of $2.8m.

Over the course of its lifetime, the Cullinan Mine has produced more than 300 diamonds in excess of 100 carats and a quarter of all the world's diamonds above 400 carats.

The group is expected to be loss-making in the current year but return to profitability next year. The shares are trading on a June 2011 earnings multiple of 9.3 times, based on current forecasts for 2011.

The luxury goods industry has been hit hard by the recession but the diamond market will eventually recover. There is still investor interest in larger diamonds, and once the economy improves the price of smaller diamonds should rise as well.

The shares were recommended at 68¾p on October 20 and the shares are down 9pc compared with a flat market. Because of the quality of its diamond mines, the shares are a buy.