Dubai stocks near bear after steepest retreat in 2 months

05/11/2015 06:14 AST

Dubai stocks declined the most since August led by real estate companies and banks, putting the benchmark index about one per cent off a bear market.

The DFM General Index dropped 2.7 per cent to close at 3,426.74, the lowest level since August 24. It was the worst performer among more than 90 gauges tracked by Bloomberg globally.

Emaar Properties led the retreat with a five per cent slide, the biggest in two months.

Dubai's index declined for three straight months after a collapse in the price of crude battered economies in the oil-producing nations of the Gulf Cooperation Council. While Dubai doesn't depend on crude directly, the capital of UAE relies on income from oil to fund government spending. Standard & Poor's last week cut Saudi Arabia's credit rating to A+, five steps below the top grade, further souring investor sentiment toward stocks in the Gulf.

The drop in oil price and Saudi Arabia's ratings downgrade are among factors "driving a prevailing negative sentiment across the region until we get a firm handle on oil," said Wafic Nsouli, the executive director of institutional sales at Arqaam Capital. "A rally in the UAE earlier this week felt very much like a dead cat bounce post Emaar numbers, and we are just retracing that move now."

Dubai stocks gained 1.9 per cent on Monday after Emaar Properties said earnings rose 31 per cent.

About 272 million shares traded in Dubai, compared with a one year daily average of 422 million. Ten-day volatility of the benchmark gauge in the emirate is the highest in two months, according to data compiled by Bloomberg.

"You are going to see volatility in the market and given that liquidity levels are lower in our part of the world this will make it worse," said Ramzi Sidani, a fund manager at Shuaa Capital, who manages about one billion dirhams ($272 million). Valuations in the UAE are 'too pessimistic,' and Shuaa is increasing its allocation to the country, he said.

The ADX General Index in Abu Dhabi fell 1.4 per cent to the lowest level since December. Abu Dhabi Commercial Bank slumped 4.4 per cent, the most since August 24.

Khaleej Times