Panic selling drags stock market down

Dubai: Fragile market sentiment and panic selling by retail investors on rumours of a likely fall in the share price of Emaar Properties dragged UAE stocks to new lows on Sunday, analysts said.

Sharp losses in Saudi Arabia and the row over Iran's nuclear programme further weighed on the market.

The Dubai Financial Market index fell 4.59 per cent to 588.10 points, a new 13-month low while Abu Dhabi fell 2.41 per cent to 3,841.11, its lowest in nearly 14 months.

Trading was average in Dubai with shares worth Dh1.3 billion changing hands but was thin in Abu Dhabi, with turnover of Dh127.2 million.

"I think its more of a panic situation than anything. There is no justifiable reason for this to happen and it is just the retail investors trying to get out of the market," said Seif Fikry, who heads the UAE brokerage of EFG-Hermes.

A top trader at a Dubai bank said small investors were selling in panic on rumours that Emaar's share price would drop to as low as Dh10 or Dh12.

Emaar, the most crucial influence on market sentiment, shed 4.29 per cent to Dh14.50. The share has slid 19 per cent since the company announced a first quarter profit of Dh1.52 billion on April 13, which fell short of some investors' expectations.

"It isn't really the results. Investors aren't really looking at fundamentals, but just scared and reacting to rumours. There is a little bit of worry over Iran as well but prices are attractive now and this is a good time to buy," he said.

The Dubai market has fallen 42 per cent this year and the Abu Dhabi index by 26 per cent, but the fall has made shares cheaper.

The UAE market now trades at a price-earnings multiple of 16.2 based on the past four quarter's earnings while Emaar trades at 13.9 times its annualised 2006 earnings.

Fikry at EFG-Hermes said the fall in Saudi Arabia also hurt UAE shares since markets in the GCC were now correlated.

Saudi stocks were down 6.44 per cent by late evening at 12,272.32, taking losses to 31 per cent since April 8, when the suspension of two brokers triggered a wave of retail selling.

"This is mainly psychology and there is no reason for share prices to decline. The economy is strong, oil prices are high, the non-oil sector is doing well and companies have posted strong first quarter results," said economist Mohammad Al Asoomi.

"Investors should hold on to their shares and not panic since prices were sure to rebound," he added.

In Dubai, Emirates Integrated Telecoms, UAE's second phone services company, fell 13.28 per cent to Dh5.94 after jumping 126 per cent on its trading debut the previous day.

Amlak Finance dropped 7.14 per cent to Dh7.41. In Abu Dhabi, top traded Dana Gas fell 2.96 per cent to Dh2.62.