DFM rebound ends as Aabar fails to win over investors with disclosure on Arabtec

Arabtec’s shares declined 9.9 per cent in early trading, after the regulators lifted the suspension Sunday morning. Courtesy Arabtec

The week-long rebound of the Dubai stock market came to an abrupt end yesterday, after Arabtec's main shareholder underwhelmed investors with a statement on its plans for the company.

The Dubai Financial Market General Index fell 6 per cent to 4,609.67, with a number of shares hitting their close-down limits after 10 per cent losses. Bloomberg News said that the index was now the second-most volatile tracked by the news service, with only Argentina's Buenos Aires Stock Exchange less stable in 2014.

Analysts expect the market to recover in the next few weeks, as banks and telecom firms start to publish second-quarter earnings.

Yesterday, the 10 stocks that hit their close-down limits in Dubai included Deyaar, Union Properties and Islamic Arab Insurance. Under Securities and Commodities Authority (SCA) regulations, if a company loses 10 per cent of its share price in a single day, further selling of that stock is suspended.

After reaching a five-year high in May, the Dubai exchange entered a bear market in June, slumping to 3,942.82 on June 30, before gaining 8.77 per cent last week. The market’s general index is up 37 per cent since January 1.

The Abu Dhabi Securities Exchange General Index lost 2.4 per cent yesterday, and is up 15.0 per cent for the year to date.

In Dubai, Arabtec fell 9.9 per cent to Dh4.46 in its first trading session since Wednesday last week, as regulators lifted the suspension on trading introduced the next day. Arabtec accounted for just less than half the value of all trading on the exchange.

That followed yesterday morning's statement from Aabar, Arabtec's main shareholder, in which it said simply that it was in discussions concerning the future of its stake in Arabtec, but would not provide further details on the confidential discussions.

“As a partner committed to and supporting Arabtec, Aabar asserts that it is currently studying a number of strategic options regarding its investments in Arabtec,” Aabar said. “Any talks it may have with any party regarding these investments are highly confidential until a decision is made.”

The statement disappointed retail investors, who reacted by exiting the stock, analysts said.

“Investors were hoping for a material announcement from Aabar,” said Taher Safieddine, assistant vice president of equity research at Shuaa Capital. “Their statement, where they said they were still considering options, disappointed retail investors.”

“It adds more evidence that things aren’t clear at Arabtec, which gave investors, who are taking any excuse to book profits after the last few weeks, another reason to sell,” he said. “Arabtec’s price will remain volatile and uncertain until all this is cleared up.”

Bloomberg News reported last week that Aabar was set to buy at least half of the former chief executive Hasan Ismaik’s shares, for a price between Dh5 and Dh6. That would boost Aabar’s stake in the builder to more than 30 per cent.

SCA suspended trading in Arabtec following the report, citing the need for “clarification from the company on media reports about strategic partners’ stake”.

"Given the history of this company, we felt that we had to be stringent," an official at the SCA told the Financial Times last week.

Mr Ismaik currently owns 28.8 per cent of the company, while Aabar holds 18.9 per cent.

The company had a market capitalisation of $5.33bn, as of the close of trading. That puts the value of Mr Ismaik’s stake at $1.54bn. If reports that Mr Ismaik is set to receive up to Dh6 per share for half of his holding are accurate, this would mean Aabar is set to pay Mr Ismaik $1.035bn to increase its holding to 33.6 per cent of the company, while leaving the former chief executive with 14.4 per cent.

Aabar is owned by International Petroleum Investments Corporation, which manages US$65.3 billion in assets, according to the Sovereign Wealth Fund Institute.

Arabtec and Aabar declined to comment yesterday.

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