Bloomberg News

Dubai Leads Market Slump Across Mideast on Iraq Unrest

June 15, 2014

Dubai shares fell, leading stock market declines across the Middle East, as escalating violence in Iraq reignited a sell-off.

The DFM General Index (DFMGI) plunged 4.7 percent to 4,609.28, the lowest close since April 6. The measure has fallen more than 9 percent since it was included in MSCI Inc.’s emerging-markets index at the start of the month. Emaar Properties PJSC (EMAAR), the company with the largest weighting on the gauge, tumbled 5.1 percent today. Qatar’s QE Index dropped 1.6 percent

“Any regional unrest is bad news for the market, certainly if it’s looking for an excuse to correct anyway,” Julian Bruce, the head of institutional trading at EFG-Hermes U.A.E. Ltd. in Dubai, said by telephone.

The Islamic State in Iraq and the Levant, a breakaway al-Qaeda group, is advancing toward Baghdad after taking the northern city of Mosul. Iraqi military helicopters attacked positions held by Sunni Muslim militants north of Baghdad as the U.S. moved an aircraft carrier into the Persian Gulf for possible air strikes to support the Shiite-led government. Iraq’s ISX General Index declined for a seventh day, tumbling 3.7 percent.

Iraq has been rebuilding its energy industry after decades of war and economic sanctions. An estimated 17 percent of the country’s crude reserves are in the north, according to the U.S. Energy Information Administration. The price of West Texas Intermediate crude climbed 4.1 percent last week to $106.91 a barrel on June 13, the biggest five-day jump since December.

The “general perception is that higher oil prices are positive for the region,” Bruce said. “But if you look at the charts of the Syria crisis you will see that any gain in oil prices was more than offset by geopolitical concerns so that the market traded down. So we had to expect something similar today.”

Technical Glitch

Emaar’s shares fell to 9.35 dirhams, extending last week’s 3 percent drop. Arabtec Holding Co. (ARTC) plunged 10 percent to 4.50 dirhams, the second-biggest decliner by index points on Dubai’s bourse. The builder’s shares slumped the most allowed as data on the Dubai Financial Market website showed Abu Dhabi’s state-controlled Aabar Investments PJSC cut its stake in the company to 14.32 percent today from 18.85 percent as of June 11.

The exchange posted a notification after market close clarifying that a “temporary system glitch” caused the “misinformation.” It said that Aabar’s holding is currently 18.94 percent.

Arabtec’s spokesman declined to comment when contacted by telephone.

Even with the sell-off in Dubai, the index rose 37 percent this year, making it the world’s best performer in dollar terms among more than 90 gauges tracked globally by Bloomberg. Valuations are at 16-times earnings, compared with 11-times for the MSCI Emerging Market Index, according to data compiled by Bloomberg.

Abu Dhabi’s ADX General Index (ADSMI) slumped 2 percent, the Kuwait SE Price Index declined 1.4 percent and the Muscat Securities Market Index in Oman dropped 0.2 percent. Saudi Arabia’s Tadawul All Share Index lost 1.1 percent.

Teenagers’ Kidnapping

In Egypt, the EGX 30 Index (CASE) fell 1.1 percent as Ibrahim Mahlab, who was reappointed Prime Minister by newly elected President Abdel-Fattah El-Sisi, continued talks to form a new government.

Israel’s shares retreated after Prime Minister Benjamin Netanyahu ordered the military to “use all means” to find three youths who he said were kidnapped in a settlement south of Jerusalem.

Netanyahu is holding the Palestinian Authority responsible for the abduction, which came 10 days after the swearing in of a unity government with Hamas. The office of Palestinian President Mahmoud Abbas said the incident occurred in an area under complete Israeli control.

The benchmark TA-25 index declined 0.3 percent to 1,392.57, the lowest since May 22.

“There are concerns the kidnapping of the teenagers may have wider security implications,” Steven Shein, a trader at Psagot Investment House Ltd. in Tel Aviv said by telephone. “Normally these events do not have a lasting or significant impact on the local markets.”

The yield on the 3.75 percent government bonds due March 2024 fell three basis points to 2.85 percent.

To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net; Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Dana El Baltaji


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