Uncertainty around Dubai’s most heavily-traded stock, Arabtec Holding, hurts investors’ sentiment across the region as most Gulf markets decline.
Arabtec has laid off a significant number of employees in the wake of chief executive Hasan Ismaik’s departure last week, sources with knowledge of the matter told Reuters on Monday.
The stock falls its daily limit of 10 per cent for a second session in a row and Dubai’s index drops 4.3 per cent as most shares also decline.
“I think that the main reason for this is the ambiguity around Arabtec which is affecting the sentiment on the market and causing some panic selling across the board,” says Marwan Shurrab, fund manager and head of trading at Vision Investments.
The decline may have been amplified by margin calls which force leveraged investors to sell stocks at certain levels.
Abu Dhabi’s index falls two per cent. Aldar Properties, which has awarded some contracts to Arabtec, such as a $1.1 billion deal for a project in Kazakhstan last year, is the main drag, down seven per cent.
Saudi Arabia’s main index slides 1.4 per cent, led by blue chips Al Rajhi Bank and Saudi Basic Industries, down 1.5 and 1.1 per cent respectively.
“I think the market needs a breather and I think Dubai is driving everyone down,” says Farooq Waheed, senior portfolio manager at Riyad Capital, adding that fighting in Iraq also remains a factor.
Shares in Saudi Arabian Fertiliser Co (SAFCO) fall 1.2 per cent after the firm delayed the start of commercial operations at its SAFCO-5 plant until the first quarter of next year and announced a reduced dividend for the first half of 2014.