Property, banking stocks sink UAE market

Dubai: UAE markets ended lower on Tuesday, dragged down by property and banking stocks amid investor worries about poor company results beyond the fourth quarter in a slowing economy.

Dubai house prices fell by eight per cent in the last three months compared to the previous quarter, according to a report issued yesterday by Colliers International, a global property consultancy. Colliers said the slide was mainly due to the tight liquidity situation and negative investor sentiment. After making gains for two straight days, the Dubai Financial Market General Index declined 2.76 per cent to end at 1708.53. Among the losers were Emaar Properties which slipped 4.84 per cent to Dh2.36; Union Properties, which shed 4.94 per cent to close at Dh0.77; and Dubai Islamic Bank, which fell 3.03 per cent to Dh1.92. Arabtec Construction led the list of losers, dropping 9.91 per cent to Dh1.84.

"Now the fear is that completed real estate projects may not have buyers and so projected profits will have to be recalculated for the first quarter," said Vyas Jayabhanu, head of Al Dhafra Financial Brokerage. "In any case, all negative factors have been priced in for the fourth quarter results."

And the effect of a decline in real estate is to be borne by banks, the stocks of which suffer as a result. "It's a domino effect," said Jayabhanu, "because if you are unable to sell those apartments and you have taken money to build them, then the outlook for repayment gets delayed and possibility of default becomes real."

The Abu Dhabi benchmark slipped 1.20 per cent to close at 2484.60, led by real estate stocks. Aldar Properties and Sorouh Real Estate fell 2.59 per cent and 5.96 per cent respectively. Banking stocks also declined.

National Bank of Abu Dhabi, the largest bank by assets in Abu Dhabi, fell 3.65 per cent to Dh9.50 and Abu Dhabi Commercial Bank ended 2.50 per cent lower to end at Dh1.95.

etisalat declined 0.47 per cent to Dh10.65. etisalat will lead a consortium to invest $1 billion (Dh3.67 billion) in building a network in Iran, a company official said. Iran confirmed on Monday that etisalat, the Arab world's second largest telecommunications company by market value, won the tender for the third mobile phone license.

"Abu Dhabi remains a better prospect for a semi-long term investment," Jayabhanu said. "Dubai has become a place more for the speculators. And people in Abu Dhabi are buying etisalat because the company has the most promising prospects ..."