Dubai Stocks Extend Rout With Biggest Decline Since 2008

Dubai stocks tumbled as turmoil at the United Arab Emirates’ largest-listed builder, Arabtec Holding Co. (ARTC), prompted the biggest selloff in almost six years.

The DFM General Index fell 8 percent, the most since October 2008, to 3,956.72 at 1:39 p.m. in the emirate as 13 stocks lost more than 9 percent, amid speculation leveraged traders are liquidating positions. The index entered a bear market yesterday after falling 20 percent from a May 6 peak. Arabtec dropped 9.8 percent to the lowest since February after the company confirmed it cut staff.

“Selling pressure on Arabtec is causing margin calls on retail investor accounts, hence the big move down across the U.A.E. as a whole,” Nayal Khan, head of institutional sales and trading at the Naeem Holding brokerage in Dubai, said by e-mail.

Shares in the emirate soared since January 2012 amid a real-estate recovery and boom in trade and tourism in the Middle East business hub. The United Arab Emirates’ central bank said June 8 there are signs the property market is overheating, fueling stock declines.

Can’t Resist

Arabtec, the company which has the fifth-highest weighting on Dubai’s index (DFMGI), plunged 53 percent so far this month as Abu Dhabi state-run Aabar Investments PJSC cut its stake, stoking speculation the builder was losing government backing. The company’s Chief Executive Officer Hasan Ismaik resigned last week.

“The market wasn’t able to resist the turmoil that has been triggered by Arabtec,” Montasser Khelifi, senior manager for global markets at Quantum Investment Bank Ltd. in Dubai, said by e-mail. “At this level we’re starting to see good buy opportunities, but this doesn’t seem to be the opinion of the majority of the market players.” The market may not recover until September, he said.

Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower and the company with the biggest weighting on Dubai’s gauge, fell 8.1 percent to 8.09 dirhams. Deyaar Development lost 10 percent to 0.963 dirhams.

“This is indiscriminate selling,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, said by e-mail. “The markets took the stairway up, and an elevator down.”

(Source: Bloomberg)