China slowdown, Ukraine hit stocks

Gulf investors join emerging markets in heavy selling

Published: 20:52 March 12, 2014

By Gaurav Ghose, Financial features Editor

Dubai: Gulf stock investors joined emerging markets in heavy selling yesterday, triggered by fears of a worsening of the slowdown in China’s economy and uncertainty over Crimea in Ukraine.

Shares in Shanghai dropped to their lowest in eight weeks as copper, a proxy for China’s wealth, plunged to a four-year low that led to worries of a serious slowdown in the country’s economy.

Last week’s China’s first domestic bond default had already added to the concerns.

Meanwhile, Russian shares lost more than one per cent as investors grew worried about possible Western sanctions against Russia over Crimea.

In Europe, bourses from London to Lisbon tumbled and safe-haven German government bonds were in demand as the jitters added to the effects of the tug-of-war over Crimea,  US stocks opened lower, putting the S&P 500 on track for a third straight decline.

Dubai’s benchmark index witnessed the biggest one-day decline in more than six months as local profit booking intensified flowing the negative global cues. The Dubai Financial Market General Index slumped 3.81 per cent to 3935.79. In Abu Dhabi, the ADX Securities Index shed 2.77 per cent to end at 4650.17.


“Sudden international shocks make the UAE markets correlated with global ones, which saw a sell off today and that triggered the drop in Dubai and Abu Dhabi as well as in other Gulf countries,” said Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital. “However, the global sell off comes at a time when the local markets needed a correction following a strong start this year.”

Elsewhere in the Gulf, Qatar’s measure fell 1.39 per cent, Bahrain’s index lost 0.92 per cent, Kuwait’s gauge retreated 0.22 per cent and Saudi Arabia’s Tadawul was almost flat, down just 0.04 per cent.

In the region, Qaqish said uncertainty over Qatar’s diplomatic spat with UAE, Saudi Arabia and Bahrain continued to weigh on investor sentiments.

Due correction

Correction in the UAE markets was bound to happen, an analyst said.

“The market went up sharply and gained nearly 35 per cent over the last four months, resulting in the indexes moving far above their major support points and having a pause, correcting sharply as expected,” said Firas Al Zghaibi, financial markets strategist at Abu Dhabi-based Menacorp, in an email.

However, he added, that today’s session saw selling momentum slowing down, which shows that “we are coming close to support points.

“We believe that this market drop is an opportunity to buy and to add more positions. We also expect the market to rise and at least reach close to the 4500 point marker in the few months,” said Al Zghaibi.

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