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Where will you find the cheapest stocks in the world? Dubai, according to Bloomberg News data.

The Dubai Financial Market General Index's 13 percent drop this year has left it valued at 0.6 times book value, a 67 percent discount to the global average and the least since Bloomberg began compiling the data four years ago.

The DFM index trades for 5.7 times analysts' 12-month earnings estimates, the lowest level worldwide and 30 percent below the average of 8.1 times during the past four years, according to data compiled by Bloomberg. Companies in the index pay dividends amounting to 4.1 percent of their share prices, almost double the 2.2 percent dividend yield on the MSCI Emerging Markets Index.

Why is it so cheap? Growing unrest in the Middle East. Dubai is the regional financial centre, home to global firms such as Goldman Sachs Group Inc. and Morgan Stanley.

And some investors, such as ING Groep NV and Charlemagne Capital Ltd., say it's time to buy. The emirate's 0.4 percent inflation rate and 0.8 percent unemployment set Dubai apart, reducing the likelihood of turmoil and presenting opportunities for investors, they say.

But beware: Dubai is one of the world's most volatile equity markets. The DFM index's 90-day volatility, a gauge of share-price swings, is the seventh-highest among major emerging and developed markets tracked by Bloomberg. The DFM index surged 493 percent between 2003 and 2007. It lost 72 percent the following year as the global financial crisis shut off access to credit and sparked a 62 percent plunge in Dubai real-estate prices. Dubai World, a state-owned holding company, rocked global financial markets in late 2009 after saying it would have to restructure debt.

So, if you have the stomach, how do you play it? The SPDR S&P Emerging Middle East and Africa ETF is a popular option. There is also the Market Vectors Gulf States ETF and the PowerShares Middle East and Africa ETF . If you need more diversification, there are also the broader iShares MSCI Emerging Markets Index and Vanguard Emerging Markets Stock ETF .

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