Business | Property
Real estate gloom takes its toll on Dubai stocks
The Dubai stock market plummeted more than seven per cent on Tuesday as investors, gripped by worries of a real estate crash and a grim regional and global economic outlook, continued to be on a selling spree.
- By Gaurav Ghose, Financial Features Editor
- Published: 00:01 November 12, 2008
- Investors bear a morose look during trading at Emirates Securities Exchange in Abu Dhabi.
- Image Credit: Abdul Rahman/Gulf News
Dubai: The Dubai stock market plummeted more than seven per cent on Tuesday as investors, gripped by worries of a real estate crash and a grim regional and global economic outlook, continued to be on a selling spree.
Led by the real estate index, which had the highest drop among all sector indices - 9.82 per cent - the Dubai Financial Market General Index dived 184.23 points, declining 7.29 per cent to close at 2,343.15. The index has declined 61 per cent this year.
Emaar Properties continued its rapid downward slide, declining 9.88 per cent to close at Dh3.74. Other listed property developers also lost heavily, including Deyaar Properties, which tumbled 9.57 per cent to Dh0.85 and Union Properties which skid 9.76 per cent to Dh1.48.
"Dubai is bearing the brunt of the regional and global market weakness... The market perception is that Dubai is seen as the "weakest link" within the GCC in this environment," said Khalid Masri, executive partner, Rasmala Investments.
"This is due to the very high percentage of market capitalisation being represented by real estate-related stocks and a perception within the market that Dubai and its companies have very high levels of leverage."
But sectors across the board suffered, including banks, finance, telecom and transportation. Dubai Investment Company, Dubai Financial Company, du, Amlak, Tamweel, Air Arabia and Dubai Islamic Bank were among the companies which slid more than nine per cent.
Abu Dhabi Securities Exchange Index slumped 152.29 points or 4.87 per cent to 2,975.28. The real estate sector was the worst performer with Aldar Properties, Sorouh Real Estate and RAK Properties dropping more than eight per cent. The energy sector closed 7.64 per cent down and banks shed 3.98 per cent.
The combined loss of market capitalisation since last Sunday is about Dh65 billion.
Overall, the bearish sentiment seems to be spreading like wildfire, affecting all stocks, said Vyas Jayabhanu, head of Abu Dhabi-based Al Dhafra Brokerage.
"Most Investors feel that the upcoming quarterly financial results are going to be dismal, considering that companies will have to revalue their property investments, which will be depreciated, value presented, in the next quarter," he said.
Adding fuel to the fire yesterday was a series of news that created havoc, Jayabhanu said.
"Investors didn't take kindly to the news that real estate major Damac has laid off 200 employees. More importantly, Sorouh announced that it is reducing the foreign ownership of its shares from 20 per cent to 15 per cent, which means less number of foreigners can participate in this stock," Jayabhanu said.
"And then there was another big one that Emirates airlines profits dived by 88 per cent...Hence, investors, who came in today, did not believe Emaar chairman Mohammad Al Abbar's statement that UAE's GDP will contract from 14 per cent to 9. They certainly feel it is going to be worse," he added.
Acute lack of activity was witnessed across the counters and speculators were conspicuous by their absence.
Elsewhere in the region, a similar gloom pervades investors. Saudi Arabia's Tadawul Index closed 5.2 per cent down and Kuwait's stock exchange, the second largest in the Arab world, dropped 2.6 per cent. Qatar and Bahrain declined 6.25 per cent and 2.74 per cent respectively.
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