UAE investors helped local equities escape relatively unscathed yesterday, even as plummeting Chinese stocks and additional pressure on oil prices provoked a further global sell-off of shares.
China’s Shanghai Composite plunged 8.4 per cent yesterday, despite a move by authorities to allow pension funds managed by local governments to buy shares in an attempt to halt declines.
The sell-offs hit bourses across Asia. Hong Kong’s Hang Seng ended the day 5.1 per cent down, while the Nikkei fell 4.6 per cent. In Europe stock markets in London, Paris and Frankfurt all ended down more than four per cent.
However headline indexes in Dubai and Abu Dhabi ended a volatile day of trading only marginally down, as investors took advantage of attractive valuations to pile back into blue chips.
The Dubai Financial Market General Index fell by 6.1 per cent to a new low for the year in the opening minutes of trading yesterday, before rallying into positive territory about midday, and finally closing down 1.4 per cent at 3,401.62.
“Everybody knows that prices are now very good after a week or two of falling prices, and especially after Sunday,” said Khaldoun Jaradat, trading manager at Brokerage House Securities in Dubai. “Some buying power came back into the market today after the early falls, although this faded when Saudi Arabia opened down.”
Still, Dubai’s close marked a new low for the year, and came just above the threshold for a bear market.
Shares in Abu Dhabi followed a similar pattern, opening down 5.1 per cent before recovering to close down just 0.5 per cent at 4,264.80, with heavyweights such as Aldar Properties, FGB and Etisalat all ending in the black.
Such rises did not imply however that local sell-offs were approaching an end, according to Muhammad Shabbir, the head of equity funds and portfolios at Rasmala Investment Bank in Dubai. “Signs of support in the local market are still very weak, meaning that Gulf stock markets are still at the mercy of international markets, and what’s happening with oil prices,” he said.
October Brent crude was on the slide again yesterday to six-and-a-half year lows, as it declined $2.53, or 5.6 per cent, to $42.93 a barrel on the London-based ICE Futures at 9.41am New York time.
The fall in oil price came as Iran’s oil minister, Bijan Namdar Zanganeh, said on his ministry’s news website that it will expand output “at any cost” to defend market share.
Saudi equities again bore the brunt of the falling crude prices, after its bourse entered a bear market on Sunday.
The Tadawul All Share Index hit its lowest level since March 2013 yesterday, ending the day down 5.8 per cent at 7,024.61.
The mood on the floor of the Abu Dhabi Securities Exchange yesterday was one of resignation.
“A lot of people including myself bought shares at the end of last week, thinking that prices didn’t have much further to fall,” said one Emirati investor, who asked not to named. “After prices fell further yesterday and today, we’re going to hold tight until prices go back up again.”
Another Emirati investor said: “Most of the big companies listed here and in Dubai are well-run companies without too many problems, so I expect them to recover before too long.
“My portfolio’s lost Dh300,000 over the last five days, but I expect to make my money back after a few months when the market picks up again.”
Follow The National's Business section on Twitter