Business | Markets
Dubai stocks suffer worst fall in months
The Dubai Financial Market General Index yesterday plummeted 2.97 per cent, its biggest one-day drop in six months, falling 155.75 points to 5,094.56. The Abu Dhabi Securities Exchange Index slid 121.56 points or 2.55 per cent to close at 4,652.42.
- By Gaurav Ghose, Financial Features Editor
- Published: 23:49 August 10, 2008
Dubai: The Dubai Financial Market General Index yesterday plummeted 2.97 per cent, its biggest one-day drop in six months, falling 155.75 points to 5,094.56. The Abu Dhabi Securities Exchange Index slid 121.56 points or 2.55 per cent to close at 4,652.42.
The market capitalisation fell by Dh21.67 billion on the day.
Fears over the sustainability of property price rise in the UAE and whether banks are going to restrict lending to the real estate sector weighed on in the minds of the investors.
In Dubai, real estate stocks declined 3.98 per cent followed by the finance and investment sector, which lost 3.05 per cent. Though it had the highest turnover of Dh178.36 billion, Emaar Properties was one of the major losers, declining 3.83 per cent to Dh10.05. Arabtec led the list of decliners, plummeting 9.91 per cent to close at Dh15.45. Mortgage lender Tamweel dropped 4.41 per cent to Dh6.50.
In Abu Dhabi, Aldar Properties and Sorouh Real Estate, among the top three stocks in terms of turnover, retreated 7.39 per cent and 6.42 per cent respectively. Overall, the real estate sector index dropped 6.79 per cent.
Morgan Stanley last week issued a report warning property prices, particularly in Dubai, would come under pressure - it forecast a decline of 10 per cent - with an oversupply expected in 2009. Also, the Abu Dhabi Chamber of Commerce and Industry published a report saying that the banks should be careful in their exposure to real estate and construction sector to avoid the US scenario. Gulf News had reported on Sunday that the Central Bank could tighten lending standards to curb the rise in real estate sector loans.
"I think there was some very aggressive selling from the GCC investors in real estate," said Julian Bruce, director of foreign institutional sales, EFG-Hermes. "There are a few voices currently questioning the sustainability of property price rise in the UAE, Dubai in particular. In addition to the Morgan Stanley report, there is also speculation regarding a government legislation related to restriction of flipping on off-plan sales. Now obviously if you see domestic investors perceiving that their opportunity to make money in some of these markets is going to be restricted, then the financial reaction to that is to sell real estate stocks."
However, the market decline at this time of the year is similar to what happened during the period preceding Ramadan last year, according to Mousa Haddad, head of trade, discretionary mandate, National Bank of Abu Dhabi.
"So in the weeks before Ramadan we will see further declines. Volumes are getting lower, bids are declining - so basically there was pressure on the selling side - I would term it as 'panic selling. ' But the fact is that the fundamentals are very strong - for real estate, banks and telecom."
Among other factors, Bruce said, investors seemed to be shying away from emerging markets in general, and there was selling on Friday, the compulsion for which came from Russia. "A lot of investors investing in the Middle East and Northern Africa (Mena) region do have an exposure to Russia as well," he said.
Elsewhere in the region, the Tadawul index of Saudi Arabia fell to a new low for the year, closing 3.55 per cent lower at 7,884.14. Bahrain's index closed 0.82 per cent lower at 2,731.02. Qatar also declined 1.81 per cent to end at 11,297.86.
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