Stormy week ahead for UAE markets as oil plunge continues

The roller-coaster ride on the Dubai Financial Market, which fell its most since 2008 on Thursday, will start from the opening bell say analysts.
Traders in Dubai Financial Market at Dubai World Trade Centre. The DFM suffered its biggest fall since 2008 on Thursday. Reem Mohammed / The National
Traders in Dubai Financial Market at Dubai World Trade Centre. The DFM suffered its biggest fall since 2008 on Thursday. Reem Mohammed / The National

- Dubai Financial Market falls another 6 per cent Sunday morning

After more than US$1.2 trillion was erased from global equities over the past week, market analysts expect plunging oil prices to continue to factor heavily as UAE markets open on Sunday.

“This is not over, we are approaching interesting levels, but as oil markets are not finding a floor, we will not see stability,” said Adel Merheb, the director of equity capital markets at Shuaa Capital. “If Brent drops to $55 there will be more pressure. It’s hard to call a bottom at the moment.”

The MSCI World Index tracking stocks in 23 countries fell 2.9 per cent last week. The Dubai Financial Market fared far worse, plunging 13.7 per cent and capped on Thursday by its worst session since 2008.

Tumbling crude prices, down 6.5 per cent last week, have rearranged the markets landscape, analysts say.

“With oil prices falling there has to be a lot of reassessing going on,” Marshall Front, the chairman of Front Barnett Associates told Bloomberg News. He described last week’s rout as “a bit of a game changer”.

Mr Merheb foresees further frantic local activity this week.

“You will see a lot of choppiness in the market with volatility ruling the day. Oil was down 4.5 per cent between Thursday night and Friday night.”

The roller-coaster ride will start from the opening bell, he said.

“On Sunday we will get an early hit on the back of global markets closing down on Friday but then see some sort of bounce during the session during the day. Those rebounds will be taken as an opportunity to sell because there will be renewed selling pressure in the market.”

But despite a few probable hair-raising days there are brighter spots, he said.

“Defensive sectors are a decent bet. Air Arabia has been doing well because lower oil prices are good for its business. The telecommunications sector as well, but the UAE does not have very diversified bourses. Property, construction and banks mostly,” Mr Merheb said.

Still, the roiling of local markets was indicative of serious concern among shareholders, which will remain until there is confidence about the stability of crude, he said. “There is no doubt in my mind that there is panic in the market … I don’t think the panic will be removed until we see a base in oil.”

ascott@thenational.ae

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Published: December 13, 2014 04:00 AM

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