Zero Hedge.....
Dubai Stocks Crash On Levered Liquidations, Margin Calls Turmoil
Long before there was a Greece (and its existential threat to world order), there wasDubai's sovereign crisis in 2009 with Nakheel; and Dubai World (the floating islands) faced with massive debt loads and interconnectednesswere bailed out. Since then it's been nothing but ponies and unicorns... until now. The debt is all still there (and the interconnectedness)... and despite the mirage of wealth creation that equity's massive rally has created, the drop in Dubai's stock market we noted yesterday turned into a rout overnight as it dropped a further 8% as one of the countries largest companies (Arabtec - Dubai's largest builder) plunged after high-level executive dismissals.“This is indiscriminate selling,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, said by e-mail. “The markets took the stairway up, and an elevator down.”
Dubai stocks dropped the most in 10 months followingtop-level dismissals at Arabtec, the United Arab Emirates’ largest-listed builder.Arabtec dropped 9.8 percent to the lowest since January after the company confirmed it cut staff. People familiar with the matter said yesterday the company’s chief operating officer, chief information officer and chief risk officer have been fired....The builder’s shares plunged 53 percent so far this month as Abu Dhabi state-run Aabar Investments PJSC cut its stake,stoking speculation the builder was losing government backing.
Dubai's speculative bubble looks to be bursting...
“Selling pressure on Arabtec is causing margin calls on retail investor accounts,hence the big move down across the U.A.E. as a whole,” Nayal Khan, head of institutional sales and trading at the Naeem Holding brokerage in Dubai, said by e-mail....“The market wasn’t able to resist the turmoil that has been triggered by Arabtec,”Montasser Khelifi, senior manager for global markets at Quantum Investment Bank Ltd. in Dubai, said by e-mail. “At this level we’re starting to see good buy opportunities, but this doesn’t seem to be the opinion of the majority of the market players.”...“This is indiscriminate selling,”Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, said by e-mail. “The markets took the stairway up, and an elevator down.”
The world's sovereign debt crises started in Dubai so it would be somewhat ironic if the central planners' bubble would start to crack first in this construction-bubbler-prone state...
Gulf News.....
Dubai index suffers biggest daily loss since August 2013
Dubai index reels under heavy selling pressure
- Staff Report
- Published: 14:04 June 24, 2014
- By Sarah Diaa, Staff Reporter
- Published: 18:00 June 23, 2014
- By Sarah Diaa, Staff Reporter
- Published: 19:00 June 23, 2014
- Image Credit: Virendra Saklani/Gulf News Archives
- An Arabtec construction site at Business Bay, Dubai. Arabtec, which has the fifth-highest weighting on Dubai’s index, has plunged 48 per cent so far this month.
Dubai: Dubai’s benchmark index plunged by 6.68 per cent to 4,009.01 points on Tuesday, its biggest daily loss since August 2013.
The index has dived around 8.7 per cent during intra trade and recovered slightly towards the close, led by real estate, services, investment and financial shares. The shares entered a bear market from Sunday after falling 20 per cent since May.
Arabtec shares declined by 9.83 per cent, lowest since February, after the company sacked a number of staff. The Arbatec saga is hurting the market and it was the first stock to hit the 10 per cent ceiling. Aman, Deyaar and Dubai Investment, National Cement and Gulf General Investments are the other shares that followed Arabtec and closed down by 10 per cent.
Abu Dhabi index closed 3.32 per cent lower at 4553.31 points, led by real estate, energy, investment and financial shares.
http://gulfnews.com/business/markets/dfm-drops-4-32-as-arabtec-falls-9-9-1.1351175
DFM drops 4.32% as Arabtec falls 9.9%
Drop in both markets attributed to a lack of catalysts
Abu Dhabi: Both the Dubai Financial Market (DFM), and the Abu Dhabi Securities Exchange (ADX) ended the day’s trade on Monday in the red, as most powerhouses saw major drops in their share prices.
The DFM index fell 4.32 per cent to end at 4,296.00 supported by a 9.90 per cent plunge in Arabtec share value, while the ADX general index dropped 1.96 per cent to reach 4,709.63. The DFM has dropped approximately 16 per cent since the end of May.
Construction giant, Arabtec, had ended the day on Sunday with a 9.86 per cent drop, approaching the 10 per cent cap for maximum drop allowed. Its plunge on Monday ended share prices at a value of Dh3.46, marking the lowest price since March.
Arabtec started the day’s trade at a share price of Dh3.79, and immediately declined to Dh3.5 in the first 10 minutes of trade. Prices continued to fluctuate until they reached Dh3.46 shortly after 10.30am, and remained stable throughout the rest of the day.
Other powerhouses in Dubai saw a decline in share prices as well, with Drake & Scull International falling 7.07 per cent, Union Properties dropping 6.22 per cent, and Emaar losing 4.86 per cent. Dubai Investments also decreased 5.20 per cent.
Sebastien Henin, head of asset management at The National Investor, attributed the drop in both markets to a lack of catalysts.
“Following the inclusion on the UAE [into the emerging market status] by MSCI, there haven’t been short-term catalysts. Plus, the fact that we’re during the summer months, and close to Ramadan, means investors are going out of the market for the moment, and market activity is quiet,” he said.
Lack of visibility
Discussing Arabtec’s performance, Henin said, “Investors don’t like the lack of visibility. Recently, we’ve seen a lot of changes [in Arabtec]. Some investors want on the short term to exit, and when things are more stable, they will come back.”
He added that investors only buy stocks when they see stability in the company, but that has not been the case for some time.
“[Arabtec] is in a phase of re-structuring now. At some point they will have to communicate with the market, and discuss their strategies,” Henin said.
As for the outlook for the market, Henin expected further profit-taking activity in the near future, saying that the markets have “gone too high too fast” and thus, need time to correct.
In the capital, most powerhouses marked little to no losses in value, as Aldar Properties fell 0.27 per cent, and First Gulf Bank went down 0.25 per cent.
Of the 31 stocks traded on DFM, 26 went down, four went up, and one remained unchanged. Of the 36 traded stocks on ADX, 27 declined, six advanced, and three remained flat.
Arabtec cuts down on staff
Source says company is going through re-structuring
Abu Dhabi: Hundreds of employees including a number of managers at real estate developer Arabtec have been dismissed following the resignation of Chief Executive Officer Hasan Ismaik, sources have confirmed.
A source close to the company who asked to remain anonymous said the company is going through some re-structuring and is trying to cut down on costs.
On Monday, Arabtec ended the day’s trade on the Dubai Financial Market with a 9.90 per cent drop that saw prices at Dh3.46 – the lowest value since March. The company has already plunged 47 per cent so far this month.
Arabtec, which has the fifth-highest weighting on Dubai’s index, has plunged 48 per cent so far this month and 53 per cent from a record 7.40 peak in May.The source added that Arabtec remains a strong company with leading projects, and such re-structuring should not impact the market, which as a whole is in the red.
Mohammad Al Hammadi, an economic researcher and independent investor, commented on the dismissals saying, “I heard there will be structural changes within the company, but I think what’s happening in the market is exaggerated. People think share prices will continue to drop, but that’s not true.”
He added that the government-backed company already has lots of iconic projects to its name, which is why investors should not worry about a change in staff.
“Those who were dismissed are bound to be replaced because the company needs employees to work on its many projects. Any company can change its staff, and that doesn’t mean there are problems with the company,” Al Hammadi said.
He continued, “Having investors sell their shares in Arabtec as soon as its share prices drop, shows that these investors have no faith in the strength of the market and its ability to bounce back.”
Lack of visibility
Discussing Arabtec’s performance, Sebastien Henin, head of asset management at The National Investor said, “Investors don’t like the lack of visibility. Recently, we’ve seen a lot of changes [in Arabtec]. Some investors want on the short term to exit, and when things are more stable, they will come back.”
He added that investors only buy stocks when they see stability in the company, but that has not been the case for some time.
“[Arabtec] is in a phase of re-structuring now. At some point they will have to communicate with the market, and discuss their strategies,” Henin said.
Last Wednesday, as Ismaik resigned, he said he will remain a board member, and that he does not plan to sell his shares. The former CEO currently owns a 28.85 per cent stake in the construction giant. He has been replaced by Mohammed Al Fahim, who is now the acting CEO.
Meanwhile, Abu Dhabi’s state-owned Aabar Investments owns an 18.85 per cent stake in Arabtec. The figure marks a reduction from its prior 21.57 per cent stake.
Good morning,
ReplyDeleteMaybe Dubai is the canary in the coalmine, I'm amazed that the central banks have been able to manipulate stocks upwards for as long as they have.
Have a great day
As the ZH article note , the first sovereign domino to fall was Dubai way back in 2009 ( history warming up its voice to rhyme if not repeat itself ? ) Central Banks have manipulated things in earnest and openly since 2008 ( Bear / Lehman / AIG implosions and all of the Central Banks moves those implosions set off globally ) and yet where do things stand - the Banks are still standing on shaky ground and equities are being propped up by Central Bank buying efforts and now Sovereign fund buying efforts ( Norway .) Nonetheless , these manipulations will only work right up until they don't work any longer.
DeleteHave a great day - going to be hot and humid and then extreme thunderstorms later this afternoon up here !