Dubai’s market plunges in a volatile session as builder Arabtec and several other stocks tumble their daily limits of 10 per cent.
The Dubai index slides 4.4 per cent to a three-month closing low of 3,943 points, bringing its losses from a multi-year peak hit in May to 27 per cent – although it is still up 17 per cent year-to-date. Dubai’s drop dampens the market in neighbouring Abu Dhabi, which sinks 2.1 per cent.
Fund managers say the losses are not due to any negative economic news in the United Arab Emirates, where confidence remains strong. Instead, the markets are vulnerable to profit-taking after posting huge gains since the end of 2012; management turmoil at Arabtec, one of Dubai’s most heavily traded stocks, has added to the selling spree.
“Arabtec continues to drive the pressure,” says Rami Sidani, head of investment at Schroders Middle East. “There is still a lot of uncertainty around the stock.”
Four other stocks – construction firm Drake and Scull, developer Union Properties, bourse operator Dubai Financial Market and lender Ajman Bank – also end limit-down.
The sharp drops appear to have triggered margin calls for leveraged investors, forcing them to sell even more stocks.
“We believe that there is some degree of leverage on the market, and that is exacerbating the pressure,” Sidani says.