DFM PASSIVE
UAE investors are exiting or sticking to the sidelines as the main indices continue to bleed. Image Credit: Ahmed Ramadan/Gulf News

Dubai: The benchmarks on the Dubai and Abu Dhabi bourses on Tuesday continued to record steep declines, even as other Gulf markets showed signs of stabilizing after a disastrous Monday. Dubai Financial Market (DFM) index dropped 5 per cent (92 points) to 1,750, while Abu Dhabi Securities Exchange (ADX) fell 6.3 per cent to 3,323 points.

With the latest drop, both indices have amassed losses of 35 per cent since touching this year’s peaks during the third week of January. “Efforts to contain the coronavirus will weigh heavily on non-oil sectors across the Middle East and North Africa over the coming weeks and months,” James Swanston, MENA Economist at Capital Economics, wrote in a note.

“Dubai is the most vulnerable... and this could ultimately ignite fears over the emirate’s large debt burden.”

GCC peers in recovery

The declines came even as its GCC peer markets started to recover, albeit slowly. The benchmark on the region’s top bourse, Saudi Arabia’s Tadawul, was up 2 per cent, while the main index in Qatar edged up 1.5 per cent and Kuwait’s Premier Market Index by 1 per cent. Declines slowed in Bahrain (down 0.3 per cent) and Oman (a drop of 0.6 per cent) from prior day’s steep declines.

Global markets too saw disastrous declines on Monday, despite central banks ramping up stimulus monetary measures to help stabilize economies in decline and markets in chaos. However, Wall Street was seen rebounding on Tuesday, tracking a similar ease in sentiment seen in Asia and Australia. With Europe being the new epicenter of the outbreak, key indices in the continent only fell deeper into the red.

Although the US Federal Reserve took emergency action designed to cushion the economy, using tools similar to those the central bank deployed to help the country emerge from the 2007-2009 financial crisis, the market’s response prompted analysts to question of how steep of a recession will be endured.

Top economies buckle

The state of the world’s second largest economy, China, where the virus outbreak began shutting down the economy toward the end of January, continued to raise red flags. Data released on Monday showed a much larger than forecast contraction in retail spending, investment and industrial production in February,

This raises the prospect of an outright decline in Chinese GDP in the first quarter of 2020 on an annual basis, analysts at Emirates NBD wrote in a note. The outbreak in China has slowed significantly since its peak about a month ago, and life has started to return to normal. Stores are reopening, factories are getting back up and running, and some schools are reopening.

However, analysts say China’s economy isn’t likely to make a full recovery for at least several months, especially as the coronavirus pandemic is now battering the West, hurting demand for the products its factories produce.

As a result a measure of business conditions in New York, the US Empire Manufacturing Index, fell by a record 34.4 points to -21.5 in March, its lowest reading since the financial crisis. New orders, shipments, employment and average number of hours worked all declined in March.