Business | Markets
Dubai stocks plummet for second day in a row
UAE markets lose Dh77.48 billion since sunday as investors ditch real estate and banking shares.
- By Gaurav Ghose, Financial Features Editor
- Published: 11:14 October 6, 2008
- Image Credit: Gulf News Archive
- The Dubai Financial Market General Index slid 7.61 per cent to close at 3,551.79. It has lost 14.47 per cent since Sunday.
Dubai: The Dubai Financial Market (DFM) crashed for the second consecutive day losing close to eight per cent as investors continued to be gripped by fears of a severe global liquidity crisis and its impact on the real estate and banking sectors at home.
The Dubai Financial Market General Index slid 292.48 points or 7.61 per cent to close at 3,551.79. In two days the index has tumbled 14.47 per cent.
The Abu Dhabi Securities Exchange Index also tumbled, shedding 211.66 points or 5.61 per cent to end at 3,558.18.
Real estate and banking sectors in both markets continued to be battered with investors forsaking stocks in both. In two days, about Dh77.48 billion has been wiped off the UAE markets.
"The global credit situation is having a very profound impact on the sentiments and confidence of the investors and that is not specific to this region," said Mohieddine Kronfol, managing director of asset management, Algebra Capital.
"What is happening is people are actually pricing in very ugly scenarios, particularly with respect to Dubai and particular concern for two things: one is the issue about the ability to finance liquidity, at least the short term credit, as well as the outlook for real estate and its impact on the system, its effect on banks and the entire business cycle," Kronfol said
"The perception among many is that the global fin-ancial market has gone bust," said Haissam Arabi, Managing Director of Asset Management at Shuaa Capital. "So, the panic is in a way justified because they don't know what to do - we have never been in a situation like this and it is very difficult to see what the bottom is - prices looks very attractive today, but it's not about attractions any more.
"There is a run for cash, there is fear, people are saying 'cash is king right now, I will take my losses and get out of it' and people just don't know what more bad news will be coming in the days ahead, what the repercussions are going to be on our markets locally."
Some of the big losers of the day on DFM included Arabtec which lost 14.95 per cent to Dh9.10, Union Properties, falling 11.47 per cent to Dh2.47, Tamweel, shedding 10.51 per cent to Dh3.15 and Emaar Properties, the heavyweight, dropping 10.74 per cent to close at Dh6.07.
On ADX, Aldar Properties shed 9.39 per cent to Dh 6.56 and Sorouh Real Estate retreated 9.24 per cent to end at Dh5.60.
The other losers were Abu Dhabi Commercial Bank, First Gulf Bank and National Bank of Abu Dhabi declining 9.35 per cent, 9.33 per cent and 8.21 per cent.
etisalat lost 5.28 per cent to Dh15.25 and Dana Gas fell 6.06 per cent to end at Dh1.24.
Caution is watchword as uncertain times grip stock markets
Mohieddine Kronfol, managing director of asset management, Algebra Capital: We would continue to see weakness in the market but obviously as time passes ... and hopefully globally things are going to stabilise... many companies are actually performing much better than what the market is pricing right now.
One would always know, given the amount of global uncertainty, one would surely recommend to leave some allocation to cash right now. But without a doubt, in case of one with a medium- to long-term outlook in these times, probably the markets are now at the most attractive levels.
If people have the courage, definitely one should go for it, but given the structure and dynamics of this market and the current uncertainty, one should expect a lot more volatility to persist... That is on the equities side. On the fixed income side, there is lot of value and tremendous opportunity for people who are a little more risk averse. People should be really considering investing in bonds because ultimately they are an investment grade supported by different governments.
Haissam Arabi, managing director, asset management, Shuaa Capital: What we are witnessing is something we haven't seen before in the history of capital markets in the region, and so it would be very difficult to make a smart deduction at this point. Today what we are seeing is absolute bloodshed, a complete avalanche in share prices to support it, absolutely no upside day trade - you have five, six seven days of decline and may be one day of upside - we are in real uncertainty and there is panic among investors and we are talking here about local investors.
With regard to the outlook... I hope that there is some sort of a bottom. I heard somebody say that even the Grand Canyon has a bottom. And it's great to say that because at the end of the day everything has a price and everything has a bottom. I hope that we are going to reach a bottom at some point and I hope that there is not of much bad news... from the US.
Vyas Jayabhanu, head of Al Dhafra Brokerage: The fears looming in the banking sector in the West have apparently infected the Gulf's banking sector too. The bank's policy to enforce regulations to strengthen its integrity has a reverse effect too. The cost of borrowing and the rates of growth are diverging dangerously. Not only is the cost of money high, but the availability of money is scarce. Investors are still licking their wounds from the collapse of financial markets and institutions worldwide. The outlook is bleak for the near future. The markets here have no justifiable reason for a crash of such a magnitude and investors will take a cue from the Western markets to trek back north.
If the UAE markets can sustain the current levels for another few months without any major crash, then a base is formed, a cue to start buying, a psychological platform so as to speak. The range will probably be sideways with varied degrees of fluctuations.
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