Dubai

Dubai stocks continued to plunge on Tuesday, with the bourse’s index falling 1.11 per cent as concerns on the embattled private equity group Abraaj mounted.

The Dubai Financial Market (DFM) index ended at 2,836.01, with the bourse a sea of red. Contractor Drake and Scull International (DSI) fell 10 per cent for the second day in a row, the largest daily decline permissible on a stock.

In a statement to the DFM website early on Tuesday, DSI clarified that there is “no material information impacting the recent trading activities” on its shares. It added that operational progress on its current projects is on track and confirmed its ability to secure new projects.

The statement did not stop heavy selling activity on the stock, which was the most actively traded by volume on DFM. Fund managers said that traders triggered margin calls when share prices fell below the psychological level of Dh1 amid concerns about DSI’s outlook and its turnaround plan.

And it wasn’t just DSI that endured pain on Tuesday.

Emaar fell 1.19 per cent, Deyaar slid 3.73 per cent, DXB Entertainment ended 4.56 per cent lower, as Arabtec declined 5.45 per cent and Union Properties fell 4.31 per cent.

Charles-Henry Monchau, managing director of investment management at Al Mal Capital, said that the UAE’s stocks were weighed by various local and international factors.

“The global context remains complicated for emerging markets — the iShares Emerging Markets ETF was down again yesterday by 1.4 per cent. This is weighing on sentiment and creating a negative feedback loop, with global investors selling active and passive Emerging Market funds …” he said.

Monchau pointed that there were also no imminent catalysts to drive buying activity and investors tend not to take risks ahead of the summer.

“Locally, the UAE markets have also been under pressure following the [effects] of the Abraaj liquidation. This does not help sentiment,” he said.

On Tuesday, Abraaj Group confirmed ongoing legal proceedings against its founder, Arif Naqvi, who is under investigation in the UAE for issuing bad cheques. He is facing arrest in the country relating to a cheque bounce case.

The statement is the latest in a storm of news about Abraaj, which earlier this month filed for liquidation in the Cayman Islands, raising concerns about other companies’ exposure to it.

The Securities and Commodities Authority (SCA) last week sent a letter to publicly listed companies asking them to disclose their exposure, if any, to Abraaj. Reuters reports said that the market regulator told companies they had until Thursday to submit their responses.

With the exception of Air Arabia, companies in the UAE have not publicly disclosed the size of their Abraaj exposure, and fund managers said that concerns about such exposure were hurting the market at a time when sentiment was already weak.

The DFM index is down 15.85 per cent year-to-date, according to bourse data.