Stock rout continues worldwide

Stockmarkets experienced another bleak day, with Gulf shares echoing overnight falls on Wall Street.

Stockmarkets experienced another bleak day on Tuesday, with Gulf shares echoing overnight falls on Wall Street. The Dow Jones Industrial Average is below 7,000, at levels not seen since April 1997. The Abu Dhabi Securities Index, which previously had a nine-day winning streak, fell 3.13 per cent to 2403.46. The Dubai Financial Market declined 2.7 per cent to 1490.02.

"A lot of investors are worried that the strong losses in the US markets will have an impact on sentiment here," said Mohammed Ali Yassine, managing director at Shuaa Securities in Dubai. The ADX is delaying its first exchange-traded fund until the second quarter due to market conditions, its chief executive said yesterday. The ADX had already postponed the launch from the end of last year to the first quarter of 2009.

"We are hoping to have the first one listed and traded in April," Tom Healy, the chief executive told Reuters on the sidelines of an economic conference. Exchange traded funds are investment vehicles that hold assets such as stocks or bonds and trade at almost the same price as the net value of their underlying assets over the course of the trading day. Mr Healy said the ADX was still planning to launch derivatives towards the end of this year or early in the next.

Financial services and property shares declined, with Sorouh down 6.58 per cent to Dh2.13 and Aldar Properties down 5.9 per cent to Dh2.23. First Gulf Bank shares declined 1.97 per cent to Dh7.97 and Abu Dhabi Commercial Bank shares slid 2.87 per cent to Dh1.69. Shares on the DFM echoed the negative sentiment, with declines in shares of the majority of the listed property and financial services firms. Shuaa Capital's shares dropped 4.39 per cent to Dh0.87, Emaar Properties was down 5.44 per cent to Dh1.91 and Union Properties fell 9.09 per cent to Dh0.60. Union Properties, the Dubai-based developer, said this week that it may cancel a proposed Formula 1 theme park if it fails to receive government cash or tap debt markets soon. The chief financial officer, Zaid Ghoul told analysts the company was seeking to sell holdings to raise the cash. The company has said it needs Dh600m (US$163 million) this year to fund operations.

Analysts said volatility was expected to continue until foreign investors return to the region. "These short cycles of strength followed by sets of lows are set to be with us for a while until we see significant foreign cash inflows," said Matthew Wakeman, a markets commentator at EFG Hermes. "The cash is on the sidelines but its deployment doesn't look like it's going to happen anytime soon." Investors worldwide have been spooked by the large losses emerging from corporates in the West. AIG, the largest insurance provider in the US, posted a US$61.7 billion (Dh224bn) fourth quarter loss on Monday ? the biggest quarterly loss in corporate history.

And HSBC, Britain's largest bank, announced plans for the issuance of $18bn of discounted stock. The FTSE 100 fell 1.8 per cent to 3560.41. Stocks in Tokyo hit a 25 year low yesterday and most major indexes in Asia were caught in the downdraft. As Gulf exchanges encourage foreign investors to enter local markets, they too grow more vulnerable to the global financial crisis. "(Global declines) are affecting GCC markets, especially Saudi Arabia, where it is adding negative sentiment on trading," Samer al Jaouni, general manager at Middle East Financial Brokerage, told Bloomberg.

The Saudi Arabian Tadawul exchange shed 1.5 per cent to 4266.66. The Kuwaiti stock exchange fell 2.04 per cent to 6400.10, declining for the fifth time in a row in the last six trading sessions as investors fret over delays of a government bailout. Doha shares shed 3.14 per cent to 4,230.19 and Muscat's exchange lost 2.16 per cent to 4771.41. Bahrain's All Share Index was the only Gulf market to post a gain yesterday, advancing 0.04 per cent to 1575.03.

[e-mail] *with agencies