Dubai slides further as Arabtec tumbles
Dubai, June 11, 2014
Dubai's market declined for a fourth straight day on Wednesday as Arabtec tumbled and the bourse said a major shareholder had reduced its stake in the construction firm.
The slide underlined how the Dubai bourse has become dominated by a few heavyweight stocks which have been swinging widely in response to frenzied trade by retail investors. The main index fell 0.6 percent.
Shares in Arabtec dropped 7.8 percent, dominating turnover. Dubai Financial Market said in a statement after trading closed that Abu Dhabi state fund Aabar Investments had cut its stake Arabtec to 18.85 percent as of Wednesday from 21.57 percent on June 8.
Some investors apparently got wind of the sales early this week, sparking a sell-off. The stock has plunged 30 percent in the last four sessions; a total of 455 million shares changed hands this week, while Aabar's holdings decreased by only about 120 million shares.
Before its slump, Arabtec had more than tripled in value this year, and most analysts considered it overvalued. The stock is still up 127 per cent year-to-date.
Aabar emerged as a major shareholder of Arabtec in 2012 and has since led a management shake-up at the company, awarding it with large contracts such as a 20 billion dirham ($5.5 billion) deal to build 37 major buildings announced in February.
It was not immediately clear whether the recent decrease in its stake signalled any change in Aabar's support of Arabtec, or whether its stake would drop further. But uncertainty about the stock, as well as suspicions that Aabar may have sold because it saw the market peaking, may continue to dampen the market.
Ali Adou, portfolio manager at The National Investor in Abu Dhabi, said the recent stake decrease did not necessarily signal that Aabar was changing its long-term support of Arabtec, but there was as yet little clarity.
Another factor behind Arabtec's bull run this year was index compiler MSCI's decision to include the company, along with 18 other stocks from the UAE and Qatar, in its emerging market index at the end of May.
Local and foreign investors built up positions in those stocks ahead of the upgrade, driving them up, and started booking profits on a large scale this month.
Abu Dhabi's bourse added 0.1 percent on Wednesday, ending a three-day losing streak, on the back of National Bank of Abu Dhabi, which gained 2.3 percent.
Qatar's market, however, resumed declining after a pause on Tuesday and fell 0.5 percent. Telecommunications firm Ooredoo was the main drag as it dropped 3.0 percent after rising 2.4 percent on the previous day.
Egypt's bourse, which had risked being dropped from MSCI's emerging market benchmark, rose 1.7 percent after the index compiler said it was no longer considering such a move. MSCI said the decision followed a substantial increase in the country's foreign currency reserves.
"The market kicked off on a positive note, likely driven by news that the MSCI Egypt Index will not be downgraded," Egyptian investment bank Pharos Holding said in a note. "Buying appetite remained strong over the course of the session."
Kuwait's index added 0.4 percent after a rare opposition rally took place late on Tuesday without any reports of violence. But the benchmark has yet to recover from a 1.4 percent drop it posted on Sunday when the protest was called.
DUBAI: The index fell 0.6 percent to 4,665 points.
ABU DHABI: The index edged up 0.1 percent to 4,876 points.
QATAR: The index slipped 0.5 percent to 12,913 points.
EGYPT: The index rose 1.7 percent to 8,709 points.
SAUDI ARABIA: The index edged down 0.3 percent to 9,872 points.
KUWAIT: The index climbed 0.4 percent to 7,279 points.
BAHRAIN: The index added 0.7 percent to 1,457 points.
OMAN: The index edged up 0.01 percent to 6,924 points. - Reuters