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13 April 2024

Investors flee after brutal losses at global markets

By Matt Smith

Dubai stocks were routed yet again as investors continue to flee the market following brutal losses on international exchanges.

The DFM dropped 5.46 per cent to 1,462 points, its largest reverse for 21 sessions as all active sectors plumbed new depths.

"This is a new wave of fear," said Mohammed Ali Yasin, Shuaa Securities Chief Executive. "Other markets have been doing badly, with the news coming out of Saudi Arabia much worse than expected, while the US exchanges have been going down for successive sessions."

The index dropped from the outset, falling more than three per cent almost instantly, and the situation deteriorated from there.

"In terms of technical analysis, the fact Dubai broke 1,600 gave an indication that 1,800 was beyond its grasp and that further declines were probable," said Yasin.

Of the 10 largest stocks on the DFM, eight are now slumbering at two year lows following another day of savage declines.

Emaar plunged 9.75 per cent to Dh1.85, the first time the developer has finished Dh2 since June 2004 as investors reacted negatively to its plans to raise Dh15 billion through a Dh7.5bn sukuk and a $7.5bn medium term note programme.

"Emaar's borrowing reminded investors that even the biggest companies are facing a liquidity crunch and that took down all UAE property developers, even those in Abu Dhabi," said Yasin.

The property giant was one of 10 stocks to fall by more than nine per cent.

The others included Arabtec, Dubai Islamic Bank, Air Arabia and DFM Company, with the latter falling the maximum 10 per cent.

"At the start of the year, many people were optimistic that the markets would improve, together with liquidity, but we've discovered that nothing has changed and panic has set in," said Yasin, adding: "When sentiment is this bad, investors do not discriminate between stocks, they'll sell anything."

DFM Co is also one of 15 Dubai stocks to have fallen below their par value of Dh1 and there is a plethora of other statistics with which to scare investors.

For example, the latest losses mean the DFM has fallen by 11 per cent – or 180 points – to far this week and is on course for its biggest weekly loss since late December.

Losers outnumbered gainers 22:2, while the latter pair – Takaful House and Arab Insurance - saw just 13 trades between them.

Yesterday's bloodbath follows a four per cent fall on the Dow Jones Industrial Average and a six per cent decline on the Nasdaq late Tuesday, plus widespread declines in Asia yesterday morning.

Forecast revised

Analysts are revising downwards their immediate expectations for the UAE markets, with further losses forecast today.

"After so many stocks hit limit down, the markets are likely to be weak," said Mohammed Ali Yasin, Shuaa Securities CEO.

This could see both UAE exchanges fall to levels not forecast even the day before, with DFM seemingly heading towards 1,250 to 1,300 in the near term, while ADX should challenge the 2,000 mark.

Balancing the battered portfolios

In the broad absence of retail investors, it seems mutual funds are largely responsible for what little trading there was yesterday, with fund managers battling to balance their battered portfolios.

For example, a manager has 25 per cent of his funds in each of telecoms, real estate, finance and energy and the latter three then see their values fall by 10 per cent but telecoms remains unchanged. This would mean the manager's portfolio was now made up of 32.5 per cent telecoms and 22.5 per cent in each of the other sectors, therefore forcing him to sell telecoms to rebalance the fund.

"Managers also have to contend with redemptions and so it seems they're driving the market down at the moment," said Mohammed Ali Yasin.

"I didn't see many day traders or retail investors active yesterday – it's mostly funds taking their direction from technical analysis. This was telling them to sell now because prices were only to going to fall and then maybe buy them back later."

Investors seem to be selling whatever they can, so the most liquid stocks have been hit the hardest. For example, the top four traders by value – Emaar, DFM Co, Air Arabia and Arabtec – all fell by more than nine per cent. This quartet claimed a combined turnover of Dh 146 million, which is almost three-quarters of the market total of Dh200m.

Emaar's Dh68m and DFM Co's Dh47m mean this duo accounted for 58 per cent of all trading.

"There's not excessive selling, but there's no buying demand, so the market can't arrest its decline – it's been the same story for more than three months," said Yasin.