Dubai: Dubai’s benchmark index — DFM — has been the worst performer globally in June, followed by Abu Dhabi’s ADX, Gulf News has learnt.
Both the indices have suffered double digit fall. DFM witnessed 22.50 per cent fall, followed by ADX with 13.37 per cent and Ireland’s ISEQ with 4.06 per cent.
Dubai bourse has been taking a beating for the past three months, led by real estate, financial and investment shares.
“A restructuring at Arabtec has induced pressure on all other shares. Arabtec is mostly dragging other shares down. What we are seeing is a correction after a strong appreciation. It is long overdue as the shares have reached exaggerated levels,” said Rami Sidani, head of investments at Schroders Mena.
Shareholders lost confidence in the property developer after its CEO Hasan Ismaik resigned and a limited staff layoff.
Arabtec’s shares have fallen 61 per cent from a record close on May 14 by 11.65 per cent. The shares have more than tripled in price this year but for the past couple of trading sessions, the shares have hit the 10 per cent daily cut-off limits many times.
Sidani said that Arabtec has been the darling of the retail investors at the beginning of the year, fuelled by inaccurate statements by the former CEO and accordingly, retail investors have been involved heavily in the stock. In the last three months, Arabtec has roughly accounted for “half of the average” daily volume.
“What we are seeing now is a reversal of the trend and a panic selling, in addition to triggering margin calls,” he said.
In 2013, DFM was the second-best performer with 107.69 per cent after Venezuela’s benchmark IBC Index, which appreciated a whopping 480.47 per cent while Abu Dhabi’s ADX index rose by 63.08 per cent.
So far till June, DFM is up by 17 per cent and ADX by 6.08 per cent despite facing turbulence.
According to Marwan Shuraab, fund manager and head of trading at Vision Investments, the negative sentiment is deteriorating due to a couple of reasons, mainly Arabtec.
Ismaik has 28.85 per cent stake in the construction company.
The big question is what will happen to the former CEO’s stake in the company? “This is what everybody is trying to find out. There is still a lot of uncertainty,” said Mohammad Ali Yasin, managing director of NBAD Securities.
Lack of new liquidity, due to Ramadan and summer holidays, is also holding back investors.
“Why new liquidity is not coming into the stocks where valuations look much stronger than other markets. Until we find an answer to this question, we will continue to see volatility,” Yasin said.
Right now, Shuraab said that negative sentiment is controlling the market. If we can see a consolidation at the support level, then we could see a recovery.
Dubai stocks are still overvalued compared to other emerging markets.
“With market conditions sliding, Arabtec is still considered one of the most expensive shares in the market. With uncertainties from the Arabtec management, the pressure will be on the shares. The management needs to have a clear vision,” Yasin said.