Panic selling rips through UAE markets over global economy fears

Panic selling ripped through regional equity markets on Monday as investors worried over the health of the global economy, worsening geopolitical issues and declining oil prices.

Dubai’s equity benchmark tumbled as much as 7 per cent, tracking losses for global markets on Friday, when IMF projections over lower global growth next year, weak data from Europe and remarks from the US Federal Reserve’s September meeting weighed on sentiment.

Closer to home, air strikes targeting ISIL fighters in the Syrian Kurdish city of Kobani failed to weaken the militant group’s grip on the border town and other cities between Iraq and Syria.

The worsening turmoil has sparked selling by foreign investors who often see the Middle East through one prism.

“The sky is falling,” said Nabil Farhat, a partner at Al Fajer Securities, a brokerage house based in Abu Dhabi. “Worries about global markets and [the] worsening geopolitical situation with Daesh [the Arabic acronym for ISIL] in Iraq is causing foreign investors to pull out.”

An announcement from Dubai’s Emaar Properties on Saturday that it had increased its dividend to shareholders to Dh9 billion from Dh8bn after listing its retail business failed to buoy sentiment.

Emaar’s shares dropped 7.4 per cent to Dh10.60 each. The retail unit, Emaar Malls Group, dropped 3 per cent to Dh3.15.

“Forget Emaar dividends, now we’re talking big,” said Sebastien Henin, the head of asset management at The National Investor, an Abu Dhabi-based investment bank. “We’re talking macro, geopolitics and oil. In such an environment, even with such a blue chip like Emaar, people won’t take it into consideration. Not today.”

Arabtec, Dubai’s biggest contracting company, tumbled 10 per cent to Dh4.05 a share. Dubai Financial Market Company, the listed shares of the emirate’s stock exchange, plummeted 9.8 per cent to Dh2.84.

Statistics from Germany showed that the country’s exports showed a significant drop for the first time since 2009, down by almost 6 per cent in August, prompting worries about the euro-zone economy. Brent oil prices declined to almost US$90 a barrel for the first time in two years.

Global equities have lost $4.4 trillion in value since reaching a record last month, according to Bloomberg. Wall Street’s fear gauge, the CBOE Volatility Index, ended at 21.24 on Friday, its highest level since early February.

The Standard & Poor’s 500 ended the week with a 3.1 per cent loss, the worst since May 2012. The gauge is down 5.2 per cent from a record on September 18, trimming its gain for the year to 3.1 per cent. The Dow Jones Industrial Average is 4.3 per cent below its all-time high reached on September 19.

Brent crude fell to $89.62 a barrel on Friday. US November crude fell to $85.32 a barrel.

“The situation is worsening in Europe – we’re not too far from a third recession in six years,” Mr Henin said. “Then you have the commodities issue. We’re OK now, but if we go below $90 [a barrel of crude] it might raise questions for the budgets of Gulf Cooperation Council member states because the breaking-even point is an average of $85 a barrel.”

Investors were pricing in a quick end to ISIL with the formation of the western coalition, Mr Henin said, but the resilience of the militant group had sparked further concern.

“After the first series of air strikes, they [investors] had a level of comfort. But now we’re hearing noise that they are close to Baghdad,” Mr Henin said. “Worries are simmering about having to send troops in this part of the world – people are scared about what might be the next step.”

At the 2pm close, the Dubai Financial Market General Index was down 6.5 per cent to 4,619.60 points. Thirty-three stocks declined, two rose, and one was unchanged.

Abu Dhabi’s equity benchmark declined 3 per cent to 4,922.56.

Dubai shares are still up 37 per cent this year, while Abu Dhabi has advanced 14.2 per cent over the same period.

halsayegh@thenational.ae

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