Dubai Index Drops Below 200-Day Average As Arabtec Again Falls Daily Limit

Dubai’s bourse falls sharply as builder Arabtec once again tumbles its 10 per cent daily limit, hurting sentiment across the board.

The Dubai benchmark falls 4.4 per cent to 3,769 points, dropping below chart support on the March low of 3,869 points as well as the 200-day average, now at 3,864 points. It is the first time that the index has dropped below the 200-day average since December 2012, when a bull market was just about to begin.

In addition to Arabtec a few other stocks, including Union Properties and contractor Drake and Scull, go limit-down.

The drop is not based on any concerns about Dubai’s economy but is part of a major correction which follows the bursting of a speculative bubble, analysts say.

“There has been escalating selling pressure due to the fact that sentiment has been hurt dramatically by the losses we have seen across the board,” says Marwan Shurrab, fund manager and head of trading at Vision Investments.

As more stocks plunge from this year’s peaks, they appear to trigger margin calls to leveraged investors.

“That creates more panic in terms of pressuring the markets further,” Shurrab says.

The emirate’s index plunged 4.4 per cent on Monday, bringing its losses from a multi-year peak hit in May to 27 per cent. Arabtec continues to dominate trading on the bourse, and until questions over its business strategy and relationship to major shareholder Aabar Investments have been clarified, investors may remain jittery – and continue to face margin calls related to Arabtec.

Also, retail investors may continue to leave Dubai and other Gulf markets because of Ramadan, the Muslim holy month of fasting.