UAE markets decline on Ukraine worries

There could be risk aversion for next couple of weeks, says an analyst

Published: 18:48 March 3, 2014

BY Gaurav Ghose, Financial Features Editor

Dubai: UAE shares fell sharply on Monday, extending previous session’s selloff, as investors turned risk averse in emerging and other markets amid worries about the fallout of the tense military standoff in what is now Russia-controlled Crimea in Ukraine.

Dubai’s benchmark stock index declined 1.88 per cent to end at 4105.90 as share prices of stocks across sectors dropped. In the capital, the ADX Securities Index retreated 1.75 per cent to 4857.79.

“I think the declines in the UAE are being driven by geopolitical events at the moment, Ukraine being the focal point,” said Saleem Khokhar, head of equities at National Bank of Abu Dhabi’s asset management group. “I guess Russian advancement into Crimea is causing the tension. It’s a matter of seeing how all of these unravels.”

Of the 33 stocks traded in Dubai, 27 declined and six advanced. Among the most active stocks, Emaar Properties fell 1.45 per cent to Dh8.85; Union Properties dropped 3.88 per cent to Dh1.98; Arabtec slipped 3.10 per cent to Dh4.69; Deyaar Development decreased 4.58 per cent to Dh1.25 and Dubai Investments lost 4.82 per cent to Dh3.36.

All of these stocks have seen substantial gains this year and it is not surprising for investors to book profits on them.

“Profit taking [has] hit DFM and ADX after continuously moving up over the past couple of months made stocks overbought and at anytime a profit taking might hit the market,” said Firas Al Zghaibi, financial markets strategist, Sales, Brokerage & Business Development, Menacorp, though he said the past few days the markets have been faced with selling pressures due to the situation in Ukraine.

In fact, corrections are sometimes welcome in what has been a bull run for the UAE markets, making Dubai one of the top 10 performing markets this year.

“Corrections are healthy, but what is driving the correction is important, said Khokhar. “Our markets shouldn’t be too much impacted by what’s going on in Ukraine, provided it does not become much more global than what it is now. The reason for correction should not be structural in nature, and in case of the UAE, the fundamentals are pretty strong.”

In Abu Dhabi, 26 stocks slipped, five advanced and five remained unchanged. Among the most active stocks, Aldar Properties, Dana Gas, Ras Al Khaimah Properties, Waha Capital and First Gulf Bank witnessed sell-offs.

In the near term, that is, for the next week or two, Khokhar said that there could be risk aversion but after that it should begin to settle. “Right now the indices are near major support levels and a rebound is expected soon,” said Al Zghaibi. “This is a bullish market so surprises are usually on the upside. We thus see this as a buying opportunity and expect both markets to rise substantially in the coming months to levels near 5,000 points on the DFM.”

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