Fears are growing of a bubble in the sheikhdom’s booming property market as shares in its largest building firm continue to fall
Dubai’s stock market suffered its biggest monthly drop since November 2008, deepening a bear market which has wiped a quarter from its value in less than two months.
The benchmark DFM General Index fell 4.4pc to 3,942.82 at 11:40, led by large by losses at Arabtec – the construction giant whose restructuring sparked a flight from real estate.
The company, which built the Burj Khalifa and is the largest listed contractor in the United Arab Emirates, fell by its daily maximum of 10 pc, bringing its losses to 61pc in June.
The index is now poised for its first loss in a quarter since June 2012, with none of the regularly traded stocks in the 30-member gauge trading above their 50-day moving average.
The fall comes at the end of a long bull market: shares had risen by 250pc since June 2012 and the DFM had been among the world’s best-performing stock-markets.
But indications have been gathering that the UAE’s property-led recovery was beginning to overheat.
The federation’s central bank warned on June 8 that there were signs the property market was overheating, having already imposed tougher mortgage rules for second and subsequent homes.
Dubai has topped Knight Frank’s global house price index for 12 months, and real estate deals jumped 38pc to $16.6bn in the first quarter of 2014.
Shareholders lost confidence in Arabtec after the resignation of its CEO Hasan Ismaik and a series of long-rumoured layoffs.
On June 24, the National Bank of Abu Dhabi withdrew its guidance for Arabtec stock, citing “uncertainty” over its future and claiming the loss of its M&A manager betrayed its lack of ambition to compete globally.
State-run shareholder Aabar Investments had already cut its stake from 21.6 to 18.85pc, prompting fears Arabtec had lost the confidence of a government which once saw it as a strategic asset.
Ahmed Shehada, head of advisory and institutions at NBAD Securities LLC, told Bloomberg: “The stress Arabtec caused is still lingering in the market, hence the flight from property and construction stocks.
“This dip is also driven by Ramadan and the lack of any catalysts before second-quarter earnings.”
Originally published on http://www.telegraph.co.uk