Bloody Sunday for UAE stocks

Dubai: UAE shares plunged on the first day after the markets opened following the Eid al Fitr holidays, dashing expectations of a positive opening after the US president signed the revised $700 bailout package into a law late on Friday.

The Dubai Financial Market General Index nosedived 283.35 points or 6.86 per cent to close at 3,844.27, its lowest drop since March 14, 2006.

The Abu Dhabi Securities Exchange Index retreated 186.88 points or 4.72 per cent to 3,769.84.

Since July, when the decline started, the market has lost a combined Dh232.3 billion or 23.15 per cent.

In simple layman's terms, if you had a share worth Dh100 on July 1, its value yesterday would have been only Dh76.85.

"Uncertainty prevails despite the US government passing the package and there is this lingering fear that the $700 billion may not be enough," said Vyas Jayabhanu, head of Al Dhafra Brokerage.

"A slowdown, if not a recession, seems imminent and it will have an impact globally, including the Middle East. The mood is gloomy all around."

Global markets closed down last week and the trend carried over into the market here yesterday, said an investment banker.

"The last week was very, very drastic in terms of negative returns on the international market while the regional markets were closed," said Fadi Al Said, head of equities at ING Investment Management, Middle East.

Market gap

"So there was a gap that occurred between the markets that needed to be closed and that's why we saw the selling today to trace back to the other global markets.

The global credit crisis already has had an effect in the UAE. The Central Bank has pumped in Dh50 billion to help local banks' liquidity.

Many analysts, however, feel that the amount is not enough to get over the local liquidity crisis. With lending becoming tighter, investors fear, it's inevitable that it will have an effect on the bottom lines of real estate companies and banks. As a result of these negative sentiments, the stocks are being badly hit. Real estate and banking sector stocks suffered the most with leading players in both under continuous selling pressure.

Emaar Properties, the most liquid stock of the day, slid 12.26 per cent to Dh6.80.

Tamweel and Amlak fell 7.37 per cent and 3.94 per cent to close at Dh3.52 and Dh3.17 respectively. Most investors, according to traders and analysts, felt that a lack of clarity on the merger led to the punishing of the stocks.

Tamweel has been in the spotlight in recent months for all the wrong reasons after inquiries were filed against some of its former executives in corruption and financial misappropriation cases.