Business | Markets
Dubai market drops over 7 per cent on fears of global financial crisis
Dubai market tumbles over fears that property boom in the Gulf will not escape fallout from financial crisis.
- Gulf News Report
- Published: 11:31 November 11, 2008
- Image Credit: Supplied photo
- It's the fourth straight session of declines for the Dubai Financial Market.
Dubai: The Dubai stock market plummeted more than seven per cent on Tuesday as investors, gripped by worries of a real estate crash and a grim regional and global economic outlook, continued on a selling spree.
Led by the real estate index, which had the worst drop among all sector indices - 9.82 per cent - the Dubai Financial Market General Index dived 184.23 points or 7.29 per cent to close at 2,343.15. The index declined for the fourth straight day.
Emaar Properties continued its rapid slide, declining 9.88 per cent to close at Dh3.74. Other listed property developers also lost heavily, including Deyaar Properties, which tumbled 9.57 per cent to Dh0.85 and Union Properties which fell 9.76 per cent to Dh1.48.
Projects
The Dubai government's two entities, Meraas Development and Nakheel, last month announced two major projects - Jumeirah Gardens and Nakheel Harbour Tower - with a combined value of Dh490 billion, on top of the major masterplanned communities - many of which are yet to take off.
Concerns are growing on the fate of the latest projects.
The Dubai Government has formed a committee to review ongoing projects, Al Arabiya TV reported yesterday.
Meanwhile, the UAE banks, which aggressively sold loans till recently have suddenly started applying stringent restrictions on retail loans, fearing a rise in defaults.
"Liquidity pressures and the increased cost of funds is only part the story. The bigger problem is the rising threat of defaults. Although we are yet to see large scale defaults, with the substantial fall in asset prices and the chances of people losing jobs, banks could face defaults," said the retail banking head of a local bank.
Damac Properties admitted this week that it has retrenched 200 employees. There are talks of large-scale retrenchment in construction, real estate, oil and gas and financial services.
As most personal loan customers are salaried employees, any large-scale retrenchment could mean a steep rise in the non-performing assets of banks. According to estimates expatriates working in the UAE remitted more than Dh4 billion during last two months, mostly funded through personal loans.
Rising risk
With the rising risk of defaults and tight liquidity in the banking system, banks are restricting loans while augmenting all the deposits they can garner.
Abu Dhabi-based Sorouh Real Estate, one of the UAE's largest companies by market capitalisation, said yesterday its Board of Directors decided to reduce the level of shareholding allocated to foreign investment from 20 per cent of the total outstanding shareholding to 15 per cent.
"The Board has taken this decision to protect the interests of Sorouh's long-term investors, both local and foreign," the company said in a statement to the Abu Dhabi Securities Exchange, where it's listed.
"The step follows the recent volatility in the share price driven by short term speculation," Sorouh added. Sorouh's chief executive officer Mounir Haidar was unavailable for comment when reached by Gulf News.
On Tuesday, shares of Sorouh fell 0.31 per cent to Dh2.95 on a declining ADX where the general index fell 4.87 per cent to 2,975.28.
Commitment: No default on debt
Abu Dhabi won't allow Dubai's government-owned companies to default on debt payments because of the emirate's commitment to United Arab Emirates federation, Abu Dhabi Commercial Bank Chief Executive Officer Eirvin Knox said.
"Dubai and Abu Dhabi are interdependent and one can't be isolated from the other," Knox, CEO of the emirate's second-largest bank by assets, said in an interview in Abu Dhabi on Tuesday.
- Bloomberg
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