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UAE Shares Continue Losing Streak

Dubai’s benchmark index which sank to four-year lows this week, tripped four days in a row, closing down 4.97 per cent to 1,609.56. Abu Dhabi’s gauge was no better, falling 3.47 per cent to 2,326.23.

“There is not enough momentum to get past resistance levels,” said Chamel Sahmy of Beltone Financial Securities.

“The markets are driven by doubts about the performance of most of the big caps. The behaviour of investors is one of near panic, that explains the freefall this week,” added Sahmy.

Dubai index heavyweight Emaar Properties lost 6.63 per cent to Dh2.25. Trading in its shares were briefly suspended in morning session as the Securities and Commodities Authority announced the expiration of the property firm’s share buyback programme.

Emaar, the Middle’s East biggest property developer and UAE’s largest publicly-traded real estate company, bought back 200,000 shares or just 0.003 per cent of its equity capital after getting approval to buy back 10 per cent of its stock.

“I think any company that is using cash to defend its share price in this environment is questionable, given the scarcity of real cash,” said Ali Khan, executive director of Arqaam Capital.

“Cash preservation through these challenging times should be given priority. This is especially relevant for real estate companies where it is still not clear what the level of house price falls there will be, and the eventual impact this will have on cash flows for companies as projects get cancelled or deferred,” added Khan.

Major decliners include telecoms operator du which slipped 10 per cent to Dh2.25. Arabtec Holding which is building the world’s tallest tower in Dubai, plumbed 8.92 per cent to Dh3.47.

Union Properties which is planning to issue convertible bonds, declined 9.52 per cent to Dh0.76.

Dubai’s biggest lender, Dubai Islamic Bank, dropped to a five-year low to finish 9.34 per cent lower at Dh1.65. Emirates NBD fell 4.91 per cent to Dh2.90.

“Dubai doesn’t have enough defensive stocks to fall back on, it’s still mostly property companies and banking institutions which are not performing very well because of the global crisis,” said Beltone’s Sahmy.

Property companies as well as financial institutions in Dubai are facing a slowdown in economic activity amid tumbling oil prices. UAE’s economy surged largely during the oil boom for the last six years as its government invested revenue to boost tourism, real estate and infrastructure projects.

Oil prices though have plummeted 70 per cent since July’s peak at $147 a barrel and traded on Wednesday at below $40 a barrel, raising concerns governments in the oil-rich region may be forced to curtail public spending.

But some economists believe governments will continue to prop up development programmes to fuel their economies.

“These countries have ample reserves to continue with the projects. We have seen that very clearlyin Saudi Arabia’s budget and I think this will be the trend. These mega-projects will help in providing fillip to the economy and will also help in improving the liquidity situation as well,” said Faisal Hasan, research head at Global Investment House in Kuwait.

Banks in Abu Dhabi dragged shares with Sharjah Islamic Bank, posting the biggest decline of 9.71 per cent to Dh0.93.

Two other banks fell more than 8 per cent — Methaq Takaful Insurance — 8.43 per cent to Dh2.36 and Union National Bank — 8.42 per cent to Dh1.75.

Bucking the trend, First Gulf Bank gained 1.03 per cent to Dh7.92. The bank disclosed on Wednesday its board will discuss on December 30, plans to revise its foreign share ownership.

UAE’s largest telecom operator Etisalat, declined 7.91 per cent to Dh9.71.

· rocel@khaleejtimes.com