Dubai’s bourse posts its biggest daily loss since August 2013 as a slide in Arabtec, the most heavily traded stock, triggers a chain reaction of margin calls that results in a broad sell-off.
The benchmark closes down 6.7 per cent after tumbling as much as 8.7 per cent at one stage. Half a dozen stocks fall their 10 per cent daily limits.
Traders say the plunge is not due to any negative news about the Dubai economy, or to geopolitical tensions related to Iraq. Instead, the market was vulnerable to heavy selling after retail buyers sent it soaring earlier this year.
Arabtec, the first stock to go limit-down, does so for a third day in a row. Its loss this month now totals 53 per cent; this triggered margin calls and since there were no buy orders for Arabtec at limit-down levels, investors were forced to meet the calls by selling other shares.
“The brokers, I believe, had to go to other shares and sell,” says Fouad Darwish, head of brokerage services at Global Investment House in Kuwait.
Arabtec on Tuesday partly confirmed reports about layoffs at the company, which followed the resignation of its chief executive Hasan Ismaik last week. At the same time, the company made no comment on its strategic direction or on what could happen to Ismaik’s 28.85 per cent stake in Arabtec, the issues which investors say are their primary concern.
The Arabtec saga has hurt confidence throughout the market.