DFM suffers worst day in ten months

The Dubai Financial Market (DFM) suffered its largest one-day reverse for almost seven months amid a savage region-wide sell-off.

The DFM's General Index plunged 2.97 per cent to 5,095 points, a new 10-month low, while the Abu Dhabi Securities Exchange dropped 2.55 per cent.

These losses were repeated across the Gulf as Saudi Arabia fell 3.6 per cent and the Doha and Muscat markets both lost more than one per cent. Bahrain and Kuwait also retreated to take the losses from these seven Gulf markets to almost 1,100 points.

"It's pretty ugly out there at the moment," said Julian Bruce, EFG-Hermes director of institutional equity sales.

"A lot of GCC investors are selling, while Sundays are traditionally quiet for foreign funds because their home markets are closed.

"Yesterday's UAE losses were predominantly driven by local investors offloading real estate stocks. Another factor is that there's a broadly negative view of emerging markets worldwide."

Analysts continue to blame last week's pessimistic Morgan Stanley report warning of a slump in UAE property prices for the vicious domestic slump and real estate-related stocks were among the hardest hit yesterday.

Construction firm Arabtec plummeted 9.9 per cent and Emaar lost 3.82 per cent in Dubai. In Abu Dhabi, Aldar Properties and Sorouh Real Estate fell 7.4 and 6.4 per cent respectively. Union Properties and Rak Properties were among the UAE's other losers.

"The market is facing a lot of issues, from low liquidity to geopolitical problems, domestic scandal and doubts over the real estate sector," said Ayman El Saheb, Darahem Financial Brokerage director of operations.

"All these factors aren't creating a very attractive proposition for foreign funds – the Dubai index fell through a mini support at 5,150 points and the next stop is 4,800."

He does not believe Dubai will rally until institutions start buying again. "There's no way to tell when this might be. As long as the Iran nuclear issue is on the horizon, foreign funds are likely to stay away," added Saheb.

Both UAE markets are likely to decline further, Bruce believes, warning they may fall a further five per cent by the end of August.
The DFM index has shed 343 points – or 6.3 per cent - in past 10 sessions and is down 14 per cent this year to make it the Gulf's second worst performer in 2008.