Real estate fears push UAE stocks down

Dubai: UAE shares continued their downward slide, with both Dubai and Abu Dhabi benchmark indices falling more than five per cent on fears of a severe downturn in real estate and banks and mortgage companies being hit by a tight credit situation, eating into profits.

The prospect of oil prices slipping below $60 a barrel is also playing heavily on the minds of investors. Oil fell to a 20-month low with its price for December delivery decreasing 2.8 per cent to $57.70 a barrel in electronic trading on New York Mercantile Exchange.

"Clearly, we are now in a phase of slowdown, and the markets are trying to digest the various leads we are getting - whether it is guidance from other public companies, when management says that perhaps not all projects will see light of day," said Ali Khan, head of equity trading at Dubai-based Arqaam Capital.

"And now with oil prices falling below $60 it does begin to affect sentiments, if nothing else."

The Dubai Financial Market General Index fell 5.48 per cent to close at 2,214.80, bringing the five-day slump to 24 per cent, its biggest decline since at least December 2003, according to Bloomberg.

The Abu Dhabi Securities Exchange Index tumbled 5.66 per cent to 2,806.73. Close to Dh90 billion has been wiped out from the markets since Sunday.

HSBC Holdings said in a report that property prices fell four per cent in Dubai and five per cent in Abu Dhabi in the month to October. HSBC and Lloyds TSB Group said on Tuesday they were tightening mortgage lending in the UAE. And there were reports, later denied by CEO Wasim Saifi, that Tamweel had to borrow from the UAE Central Bank to cope with high financing costs amid market volatility.

Tamweel, one of the two mortgage giants, fell to its lowest since it listed in July 2006, closing 9.35 per cent lower at Dh1.26. Amlak Finance fell 9.49 per cent to Dh1.24.

There have been reports of property developers, such as Damac Properties and Omniyat Properties retrenching staff. Emaar Properties, the largest Arab real estate developer, sank to a four-year low, retreating 9.89 per cent to Dh3.37. To ease mortgage payments of its buyers, the company has provided the option to defer payments on new homes.

Banks lose

In Abu Dhabi, Sorouh Real Estate fell 9.46 per cent to Dh2.67. Construction companies Arabtec Construction and Arkan Building Materials fell 9.95 and 9.13 per cent. Dubai Islamic Bank and Sharjah Islamic Bank lost more than nine per cent and First Gulf Bank and National Bank of Abu Dhabi eased more than six per cent.

"Banks are facing tough times as real estate is slowing down and construction activities have been delayed, which affects growth in the sector," said Shiv Prakash, equity investment analyst at Mac Sharaf Securities. "Profitability is coming under pressure and fixed expenses are becoming a big burden thus the companies are retrenching staff in huge numbers."

Tadawul stages late rally

Most stock markets in the Gulf states tumbled yesterday for the fourth day as investors continued to be in the sell-off mode on concerns over the global economy.

Saudi Tadawul All-Shares Index, which was down throughout the day, rallied in the final minutes to close up a meagre 0.35 per cent at 5,485.19 points on the back of a 2.6-per cent rise by the banking sector.

The Kuwait Stock Exchange, the second biggest in the region, shed 2.26 per cent to 8,851.60 points, the lowest level since July 2005. The index has shed more than 43 per cent since June 24.

The Doha Securities Market dropped 4.7 per cent to finish at 6,043.12 points, a two-year low. It has lost 18.4 per cent this week.

The small Muscat Securities Market closed down three per cent and Bahrain Stock Exchange was 2.3 per cent lower.

The seven bourses have so far shed well over $80 billion of their market value this week.