Global stock market rout felt in UAE

A currency dealer works in front of electronic boards showing the Korea Composite Stock Price Index and the exchange rate between the Chinese yuan and South Korean won, at a dealing room of a bank in Show more

UAE equities fell amid a global stock market rout sparked by China’s devaluation of the yuan for the second day in a row.

Markets fell from Germany to Singapore amid fears the devaluation and ensuing currency volatility will hit global growth.

The FTSE 100 fell 1.7 per cent, while Germany’s DAX lost 3.2 per cent in late trading.

MSCI’s index of Asia-Pacific shares outside Japan declined 1.1 per cent, as stocks from China to Singapore fell on news of China’s surprise devaluation. The reverberations of the fall in global markets was felt in the Arabian Gulf region, with all markets except Bahrain slipping. Saudi Arabia’s main index closed down 0.5 per cent.

“What we are seeing today is definitely a contagion effect from what is happening on the global scene, and basically global emerging markets are under severe pressure after the devaluation announced by China,” said Rami Sidani, the head of Middle East and North Africa Equities at Schroder Investment Management in Dubai.

“This could trigger a currency war or at least a deflationary move by the largest consumer of commodities and minerals within the emerging markets world. As a result it has put substantial pressure on emerging markets and global markets.”

The Dubai Financial Market General Index fell 1.2 per cent to 4,022.12, led by construction and real estate stocks.

Drake & Scull lost 3.7 per cent to Dh0.724 after the Dubai-based contractor posted a 76 per cent year-on-year drop in net profit for the second quarter owing to project delays and cost overruns. Dubai Parks and Resorts dropped 2.3 per cent to Dh1.24 after the company reported a second-quarter loss of Dh29 million.

Disappointing results from construction and real estate companies such as Drake and Union Properties are also creating negative sentiment in the market, according to Fathi Ben Grira, the chief executive of Menacorp, an Abu Dhabi-based investment bank.

“You can be influenced by international factors such as the markets in Asia, but at the end of the day what investors are looking at are the companies listed in these [local] markets,” said Mr Grira.

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