Dubai stocks in bear market as US rate hike looms

The prospect of a December rise in US interest rates and fears about credit rating cuts drove UAE stocks to their lowest level of the year on Sunday, with Dubai’s stock market entering bear market territory.

The Dubai Financial Market General Index registered its sharpest one-day fall in 11 weeks, closing down 3 per cent at 3,347.23, its lowest close since December.

Abu Dhabi’s headline index closed down 1.6 per cent at 4,193.85, its lowest level since mid-December.

The DFM officially entered bear market territory on Sunday, having fallen more than 20 per cent from the peak level at the end of April. Abu Dhabi shares have fallen 14.4 per cent from their peak in late July.

Friday’s better-than-expected US payroll data has raised expectations of an earlier than expected increase in US interest rates next month, fuelling fears of a sell-off of emerging market stocks, according to Sanyalak Manibhandu, a research manager at NBAD Securities in Abu Dhabi.

“The rise in interest rates will not directly affect the UAE given the dirham’s peg to the dollar, however there is a fear of a wider sell-down of emerging market stocks that will include Middle Eastern equities,” he said.

Mr Manibhandu noted that institutions had further trimmed their positions in UAE equities following the downgrade by Standard & Poor’s of several Saudi banks on Thursday.

“The downgrade was a big negative for the UAE as institutions fear that Emirati banks and companies may be next on the list for a downgrade. Whether that’s right or wrong, that’s what’s driving the sell-down.”

For the year to date, the Dubai index is down 11.3 per cent and the Abu Dhabi index is 7.4 per cent lower.

Arabtec was among the worst affected Dubai stocks on Sunday, amid concerns about its third-quarter results, due to be released next week. The construction company’s shares plunged 8.2 per cent to Dh1.34 apiece, their lowest level since May this year.

Shares in Air Arabia, meanwhile, fell 5.2 per cent to Dh1.27 apiece, after the Sharjah-based airline’s third-quarter results came in below expectations.

Real estate and construction stocks were among the worst affected in Abu Dhabi. Aldar Properties fell by 5.7 per cent to Dh2.28 a share, while Rak Properties ended down 5.4 per cent at 52 fils a share.

The index heavyweights FGB and Etisalat ended the day down 1.6 and 0.9 per cent respectively.

Saudi stocks also hit new lows for the year on Sunday, with the Tadawul All Share Index closing down 0.4 per cent at 6,922.96.

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