Dubai shares plunge on oil sell-off

UAE stocks continue slide amid panic selling as the price of oil tumbles to levels not seen since 2009.  
The Dubai Financial Market General Index tumbled 7.3 per cent on Tuesday. Reem Mohammed / The National
The Dubai Financial Market General Index tumbled 7.3 per cent on Tuesday. Reem Mohammed / The National

UAE stocks were in freefall again on Tuesday in what one securities brokerage here dubbed “Black Tuesday” for Middle East markets.

Not only were UAE stocks, led by the property developers Emaar Properties in Dubai and Aldar Properties in Abu Dhabi battered, but equities in Saudi Arabia, Kuwait and Qatar also slid as the price of crude oil, which underpins GCC economies, dropped further.

The Dubai Financial Market General Index tumbled 7.3 per cent while the Abu Dhabi Securities Market Index shed 6.9 per cent. Brent crude oil prices extended losses to levels not reached since 2009 as the price per barrel declined 3.3 per cent to US$59.11 at 10.15am in New York.

In the past three days, Dubai’s benchmark measure has shed 14 per cent, and more than Dh60 billion has been wiped off the market value of the nation’s equities in the same period.

The DFM is now down nearly 8.5 per cent for the year. Abu Dhabi has slid 9.2 per cent in the period. Emaar and Aldar, which had been riding high on the back of a revival in real estate, both dropped by the maximum 10 per cent allowed by the regulator.

Emaar, Dubai’s biggest publicly traded real estate company, plunged to Dh6.1 a share, taking its drop from its high of Dh10.4 this year to more than 40 per cent. In Abu Dhabi, Aldar plummeted to Dh1.98 a share.

UAE ministers stepped up to try to reassure investors, with the Minister of Economy Sultan Al Mansouri saying that ups and downs were normal for stock markets and that he expected a rebound.

Meanwhile, the Minister of Energy Suhail Al Mazrouei told a financial conference that the country can cope with the drop in oil prices. The large fiscal reserves that the UAE has built up will allow it to keep spending on development projects in coming years despite the recent plunge in oil prices, he said.

Others were less sanguine.

“The UAE equity markets have lost most of the gains they made through the year and with the continued decline in the price of oil influencing all markets, it is difficult to see how this slide will be stopped,” said Nour Eldeen Al Hammoury, the chief market strategist at Abu Dhabi-based ADS Securities. It called today “Black Tuesday”.

The UAE is the world’s eighth-biggest oil producer and the Federal Government funds more than 60 per cent of its budget from crude exports.

The drop in UAE stocks comes as oil has shed more than 45 per cent of its value this year amid increasing production in countries such as the United States and waning demand amid a global economic uncertainty.

In the past two days alone, the price of crude has dropped 4.6 per cent.

The drop in Middle East markets also comes amid a tumble in developing markets, with the benchmark MSCI Emerging Markets index shedding as much as 1.5 per cent on Tuesday. Russia, in the grips of an economic meltdown with the drop in crude oil, a weakening currency and sanctions placed on it in the aftermath of the president Vladimir Putin’s annexation of Crimea, led the declines.

And while the fortunes of UAE stocks in recent years have been largely tied to the revival of the economy following years in the wilderness, it has also benefitted from a renaissance in trade, tourism and investment from other emerging markets such as Russia. That flow of money may now be stemmed.

“The drop in the Russian rouble will also have an impact on tourism to the UAE,” said Shafi Wahid, the head of the institutional equities desk at Mubasher Financial Services.

“The Russian rouble is down 40 per cent since the crisis, so the spending power is reduced and will mean fewer tourists coming in.”

mkassem@thenational.ae

* with Reuters

Published: December 16, 2014 04:00 AM

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