UAE stocks crash led by real estate firms

Dubai: The Dubai Financial Market plunged 4.64 per cent to close at 4,471.71 and the Abu Dhabi Securities Exchange slid 3.74 per cent to end at 4,149.57 on Sunday.

Real estate stocks continue to be battered in both the markets with Emaar Properties, Union Properties, Aldar Properties and Sorouh Real Estate falling substantially. Regional and international factors, more immediate, along with the prevailing negative sentiment led to the sudden drop, say analysts.

Selling pressure from foreign funds, a steep decline in Saudi Arabia's Tadawul index on Saturday, and fall in global equity markets and a bearish sentiment combined to hit both the markets.

"The reason for the market going down is the bearish mood of the investor. For the twelfth week now, the foreign investors have been selling. So, when the dollar is strengthening and the oil is moving up and down, they re-look at their portfolio and they take a view of exiting the profitable positions and that is what they are doing.

"When they exit, they don't really look at the market prices and estimations. They might have booked a profit, and they are exiting. They will only hit the bid. So when they hit the bid, a lot of stocks are hitting 5 per cent down, six per cent down, even limit down," said P. Krishna Murthy, CEO of Dubai International Securities.

Bearish sentiments and weak regional and global equities add to the selling pressure of funds.

"All the markets are weak and so when the sentiment is negative people see the bad news more than they see the good news," said Chahir Hosni, director of high net worth sales, EFG-Hermes UAE Limited. "With the US market going down last week taking Europe with it and yesterday's [Saturday's] more than five per cent fall in Saudi Arabia, it was expected that the UAE markets would fall today [Sunday]. It was predictable, but of course, the decline was sharp in both markets."

No buyers

"Some of the stocks didn't have any buyers. They also want to come in, but when they see that a very bearish mood, they think that they can wait to reenter. So that is holding them back. But for sure there is lot of money waiting to reenter," Krishna Murthy said.

Real estate stocks have been the worst hit in both markets. Real estate index on DFM fell 668 points or 7.30 per cent to close at 8490. Emaar Properties, the largest Arab developer, dived 7.98 per cent to Dh8.07. The most liquid stock of the day, trading shares worth Dh417.7 million or 39.5 per cent of the value traded on the market yesterday, it touched a low of Dh7.88. Union Properties closed 6.93 per cent down to Dh3.49. Deyaar Development fell 4.40 per cent to end at Dh1.74.

Arabtec Construction, the second most liquid stock of the day trading shares worth Dh96.8 million, slid 6.90 per cent to Dh13.50.

It was no different on Abu Dhabi Securities Exchange with real estate stocks leading the decline. The real estate sector index plunged 8.30 per cent. Aldar Properties and Sorouh Real Estate, the two most liquid stocks with traded shares valued at Dh149.933 million and Dh95.59 million, plunged 8.77 per cent and 8.48 per cent respectively. RAK Properties also fell 3.80 per cent to Dh1.52.

"There is a feeling that real estate have reached significant levels in this part of the world, which is borne out of the subprime crisis, and they are having a closer look at the sector," said Krishna Murthy. "Many are also talking about the earnings valuation methods, especially the companies in Abu Dhabi calculating on the basis of revaluation gains. So it is not just the Morgan Stanley report that has contributed to the negative sentiments."

Many investors believe that the real estate sector is going to slow down and a correction is imminent, whether true or not, but that drives their sentiments Prakash said.

Banks and investment and finance stocks also suffered on both markets. On DFM, the banking sector index was down 3.17 per cent and the finance and investment sector index 3.68 per cent. On Abu Dhabi, bank index dropped 3.61 per cent. First Gulf Bank declined 9.73 per cent to close at Dh18.55. On Dubai market, Dubai Islamic Bank and Ajman Bank fell 4.09 per cent and 4.26 per cent respectively.