Business | Markets
Scandals weigh on UAE shares
Stocks fell in UAE on Thursday as the markets continue to battle several factors in the downturn of the past few weeks.
- By Gaurav Ghose, Financial Features Editor
- Published: 23:42 August 21, 2008
Dubai: Stocks fell in UAE on Thursday as the markets continue to battle several factors in the downturn of the past few weeks.
The Dubai Financial Market closed down 1.31 per cent to 4,891.15 and the Abu Dhabi Securities Exchange index slid 2.02 per cent to 4,455.43.
Market capitalisation in Dubai and Abu Dhabi fell a combined Dh81.31 billion in August.
Investor confidence has been shaken in recent days by news of corruption allegations against real estate and associated companies.
Real estate indices shed 2.48 per cent and 4.17 per cent in Dubai and Abu Dhabi, respectively, with heavyweight Emaar Properties closing at a 40-month low. It closed at Dh9.39, down 2.29 per cent.
In Abu Dhabi, Aldar Properties and Sorouh, among the most actively traded stocks, dropped 4.62 per cent to Dh7.43 and 3.85 per cent to Dh10. Among the other losers were Deyaar Development and Union Properties, which fell 3.70 per cent and 2.06 per cent, respectively.
"Real estate has been considered a safe haven for investors and when this safe haven is attacked by allegations of bad information and misconduct, the market reacts," said Vyas Jayabhanu, manager at Al Dhafra Financial Broker.
"Real estate, building materials companies and banking and finance are all affected if real estate takes a hit. The confidence of the investor is shaken."
But there are analysts who believe that while negative news does affect investor sentiment, it is not the sole reason for the current sell-off. It is a fact that foreign investors have been net sellers since almost the end of June. And particularly, between July 15 and now, a period of summer vacation, a large segment of local investors have not been active.
Not enough support
"That means the support is not coming through while selling pressure continues," said P. Krishna Murthy, CEO of Dubai Institutional Securities. "And what happens when the foreign institutions decide to exit, they only try to hit the bid in terms of selling. Let's say the bid is five per cent down, the instruction is 'no problem, sell it'. And when that happens, some sort of panic grips the market from the inside and other locals."
But he did not totally underplay the effect of bad news.
"I don't think these are of major concern, though sentimentally, short-term caution will be required to see that there are no more surprise elements in the whole situation," Murthy added.
The effect on prices of some of the real estate stocks has much to do with the timing of exit, feels another analyst.
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