Market mayhem continues

Dubai: Local markets suffered another day of mayhem at the hands of panicky investors who continued to sell, pressured by worries about the local and global financial turmoil that seems unending.

The UAE Central Bank's repo rate cut by 50 basis points, following the US Fed cut, was a bit too late to staunch the day's slide, but traders and analysts hope it will have a positive impact on the market today.

Both Dubai and Abu Dhabi bourses suffered this week's worst declines on Wednesday. While the Dubai Financial Market General Index plunged 284 points or 8.43 per cent to close at 3,085.02, extending the four-day loss to almost 29 per cent, the Abu Dhabi Securities Exchange Index plummeted 6.43 per cent to end at 3,176.94.

In just four days almost Dh150 billion have been wiped off the markets.

"No one in their right mind is going to look to call a bottom on the market," said Ali Khan, director of capital markets for Arqaam Capital.

"But the ferocity of selling we have seen and the one term that I have been using is that there has been a cloudburst of selling, and by its very nature it tends to be very dramatic, very short-lived. Hopefully, there will be flatter performance, if not on Thursday, then by Sunday. That doesn't necessarily mean we are talking about a bottom, but some sort of stability. "

The days of easy credit seem to be over in the UAE, adding to the concerns of the investors.

Worries

"Investors are worried that much of the strong economic and corporate profit growth of the past several years has been fuelled by cheap money, which is no longer available," said Eric Swats, partner, Rasmala Investments.

"Investors are also worried about over-building in the residential construction market."

Several stocks, such as Emaar Properties, which fell almost six per cent, Air Arabia, which plunged 9.24 per cent, and Ajman Bank (14.93 per cent), are all trading below book value. On ADX, Aldar Properties slumped 9.43 per cent and Sorouh Properties declined 9.75 per cent.

Fearing the worst credit crisis ever could wreak havoc on world economies, resulting in a severe global recession, the Bank of England, European Central Bank, Canadian, Swiss and Swedish central banks slashed their interest rates.

"It's almost indirectly like a second bailout package to resolve the liquidity crisis globally and this time it should have a positive impact after several days of sell-off," said Haissam Arabi, managing director of asset management, Shuaa Capital.

"So, on the back of that we might have a chance of a nice little breather on Thursday with the markets potentially rebounding."