Stocks fall as recession fears prevail

Abu Dhabi: Panic continued to grip investors on Thursday as the stock market sell-off went into its second session, dragging the total market capitalisation down by Dh29.76 billion.

The Emirates Securities general index dropped by more than 5 per cent to 3,934.07, bringing losses since the beginning of the year to 34.61 per cent.

Meanwhile, international crude oil futures fell below $70 a barrel after a US government report showed a bigger-than-forecast increase in inventories.

Supplies rose 5.6 million barrels to 308.2 million barrels in the week ended October 10, the Energy Department said in a weekly report.

Inventories had been forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.

Many analysts are attributing the downtrend to the bearish performance of the international markets, claiming that investors here are only reacting to reports predicting a global recession.

“By the close on Tuesday there were bids for more than 27 million shares of Aldar Properties and no offers, yet the market woke up to a total sell-off on Wednesday, and that is beyond logic, said Ahmad Abdul Rahman, head of research and financial analysis at Amanah Capital.

“There is a dire need for strong governmental or institutional intervention to salvage the markets from this vicious circle, where we find most investors abandoning their positions to capture lower prices,'' he added.

The high volatility and correlation with international markets is unjustified for many, where corporate disclosures in the US are plagued by falling profits or losses, or even bankruptcies.

“To the contrary, we find that the corporate performance in the UAE is very solid, yet Emaar Properties, for instance, is still trading below its book value,'' Abdul Rahman said.

In Dubai, the general index plunged 6.53 per cent to 3,204.11, with all leading shares ending deep in the red. Emaar, Arabtec and Tamweel stood a few notches above the maximum limit down by the close.

The case at the Abu Dhabi Securities Market (ADX) was no exception, where the benchmark index fell 4.5 per cent to 3,366.72, although the listing of Abu Dhabi National Energy's (Taqa) convertible sukuk lifted the market capitalisation by Dh4.12 billion.

“More transparency is needed when it comes to convertible sukuk or bonds, and that problem is obvious with Aldar,'' Abdul Rahman demanded.

Aldar Properties fell by 9.77 per cent to Dh5.99, typically followed by Sorouh Real Estate which dropped 9.59 per cent to Dh4.88.