UAE bourses reverse gains as investors book profits

Abu Dhabi: After two consecutive days of strong gains, UAE markets reversed course on Wednesday, as desperate investors resorted to early profit booking after last week's drains.

More than Dh24 billion of market capitalisation was wiped away following the four per cent decline recorded by the Emirates Securities general index which stood at 4,142.65 by the close.

"The market decline has nothing to do with the UAE, as investors are only following the trend in international markets where corporate earnings is now the concern," said Khalid W. Kurdieh, chief executive of Mashreq Securities.

In Dubai, the benchmark index retreated 7.44 per cent to 3,427.87 on account of the tangible losses recorded by the leading shares.

Emaar Properties fell by 9.88 per cent to 6.11, a few notches above the maximum limit down of ten per cent, followed by Deyaar Development, which fell 9.59 per cent to Dh1.32.

The real estate sector reported the worst performance dragging the sub-index down 9.85 per cent. All of the 32 traded shares ended the session in the red, with the transport, banking and utilities sub-indices retreating substantially.

"The markets' momentum will continue to react aggressively to the official announcements at this stage, and the drop is natural given the nature of retail investors, who tend to be emotional," Kurdieh said.

In Abu Dhabi, listed companies reacted positively to the market's request for early disclosures, where Union National Bank (UNB) and Finance House (FH) posted their third quarter results. Nevertheless, early profit booking was also the norm there taking the general index down 2.13 per cent to 3525.82.

Both UNB and FH reported an increase in their assets by 34.9 and 24 per cent respectively, negating the claim that the flight of foreign funds had negatively affected the assets of local banks. UNB advanced 8.3 per cent to Dh4.90, while FH gained 4.91 per cent to close at Dh11.60.

"Early disclosure will prevent rumours from spreading during such critical times," Rashid Al Baloushi, deputy chief executive of Abu Dhabi Securities Exchange (ADX) said.

Other leading banks ended the session in red, with the National Bank of Abu Dhabi retreating 3.66 per cent to Dh11.50, and Abu Dhabi Commercial Bank falling 2.78 per cent to Dh2.80. Only a handful of the traded companies recorded gains 29 out of the 37 traded shares ended the session in the red.

Remedy: ADX may curb 'hot money'

The Abu Dhabi Securities Exchange (ADX) may act to curb foreign "hot money" - the short term stock market plays - if it causes market instability, the bourse's deputy chief executive said yesterday.

"We as a market have been able to attract foreign investment, which is needed because we are trying to encourage liquidity," Rashid Al Baloushi told reporters. "But if we have a problem with hot money from outside, we will fix it."

Foreign holdings in ADX amount to about 10 per cent but foreigners account for about 30 per cent of total trading. "It means it is hot money, not long-term and can leave any time which is bad for market stability," Ziad Al Dabbas, advisor for Capital Markets at National Bank of Abu Dhabi told a brokerages forum. "In markets such as Abu Dhabi and Dubai, although foreign holdings are low, they account for high trading volumes, which is dangerous," he said.

Dabbas said the regulator can act by bringing down the minimum percentage of holdings for foreigners. "But, at the same time, this is an open market and foreign investments are needed," he added.

- Reuters