Russian tower report rocks Arabtec stock

President Dmitry Medvedev orders work to be stopped

Shares of Arabtec Holding took a battering this week, dropping in four out of five trading sessions. Reports on Wednesday saying the Russian president Dmitry Medvedev had ordered work to be stopped on the US$2.7 billion (Dh9.91bn) Okhta Centre tower in St Petersburg, one of Arabtec's most important contracts, did not help investor confidence.

The company posted a statement on the Dubai Financial Market website saying the company "was not informed about the decision to stop the project", but investors still offloaded Arabtec shares. Arabtec closed 1.08 per cent lower at Dh1.83, bringing its total losses to 5.1 per cent this week. The company has struggled to maintain cash flows since the onset of the financial crisis and was looking to generate cash from its foreign projects to compensate for the weak domestic market.

Arabtec, which won the Russian contract in April 2008, has carried out foundation tests for the tower and expects to win other preparatory works in the coming months. Last month, Mr Medvedev supported a UNESCO bid to halt construction of the glass-and-steel building among the baroque mansions of the city's historic centre. The tower, set to house the state-run gas giant Gazprom's offices by 2016, has caused an outcry among local residents and opposition parties. It is billed to be the highest office building in Europe when completed.

"Of course [the news] is a reason for the decline but you also have to consider that the market is generally very low on confidence and investors sell on any excuse," said Nour al Zoubi, the general manager at MAC Sharaf Securities in Dubai. He believes Arabtec shares are oversold. "Today we have seen some interest in the market at current levels and we expect the trend to reverse soon. For Arabtec in particular we expect more strength next week when there is more clarity on this news," Mr al Zoubi said.