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UAE markets in free fall

DUBAI — The troubles of the UAE stock market investors deepened yesterday as fresh round of margin calls from brokers and banks triggered another round of panic selling in the market.

While the Dubai Financial Market index slipped 4.11 per cent to hit a new 13-month low, the Abu Dhabi index fell to its lowest level in almost 14 months. The DFM Index closed 24 points down at 562.4 points, its lowest close since March 30 last year as the UAE benchmark NBAD General Index slipped 2.36 per cent to 12,476 points.

Key market indices have recoiled for the third consecutive trading sessions yesterday. On Thursday the DFM index had slipped close to 5 per cent. The UAE bourses have been on a free fall since the beginning of this year losing close to 45 per cent value.

"There is panic across the market as both individual and institutional investors turning net sellers. Although there is no logic to the current round of panic selling that is the way market reacts when sentiments are weak,” said Daheer Quraish, an investment analyst.

Mostly the liquid counters such as Emaar, Amlak, Tabreed, Union Properties and the newly listed telecom share du took the brunt of panic reactions from investors. “The big fall in share prices on Thursday triggered a fresh round of margin calls when the market opened for trading today. The virtual drying up of leverage opportunities kept speculators away from buying while margin calls forced many to liquidate their positions to square of the deals,” said a source.

The UAE market capitalisation fell more than Dh15 billion to Dh719.6 billion as the total losses during the last two sessions mounted to more than Dh34 billion. Across the two bourses the total market turnover fell 40 per cent to Dh1.23 billion.

The Dubai Financial Market traded 131 million shares worth Dh1.13 billion yesterday with Amlak, Emaar and du together accounting form more than 90 per cent of the market volumes. Amlak fell 6.39 per cent as Emaar and du slipped 4.67 per cent and 3.1 per cent respectively.

The herd mentality was evident in the market yesterday. Typically markets tend to overreach either in a rally or a crash before settling back into a long-term trend.

Currently, DFM trades at an average Market P/E of 17, down from the peak of 28 in September last year. Some of the leading stocks such as Emaar, Amlak and Tabreed trading at P/E ratios in the range of 14 to 16. “Currently Emaar is trading at a P/E of 14.5 which is comparatively very low when it has a fair value based valuation of about Dh22,” said P. Krishnamurthy, an independent analyst.

Turnover and volumes fell sharply in Dubai, which brokers said indicated that the trading was dominated by retail investors, many of whom borrowed heavily to buy equities during a months-long bull-run last year.