UAE stocks sell off continues with fate tied to oil

Most shares hovered near the maximum one day price drop of 10 per cent at the opening bell, but they recovered slightly by the close.

Hadeel al Sayegh
January 6, 2015

Updated: January 6, 2015 04:00 AM

The rout on UAE stock markets continued yesterday as an 11 per cent drop in the price of Abu Dhabi’s Murban crude to near US$45 a barrel rattled investors.

Most stocks hovered near the maximum one day price drop of 10 per cent at the opening bell, but they recovered slightly by the close with losses averaging between 4 per cent and 7 per cent.

The Dubai Financial Market General Index eventually closed 3.2 per cent lower at 3,450.00 points, while the Abu Dhabi Securities Exchange General Index declined 2.6 per cent at 4,311.89 points.

“If Murban continues to trade at this level it’s going to have implications on everything,” said Nabil Farhat, a partner at Al Fajer Securities.

The panic over energy prices has extended the total losses so far this week on the ADX to 4.7 per cent and on the DFM to 8.5 per cent.

The mood was dulled further following a disappointing performance of international and regional markets on Monday.

In the United States, the Dow Jones Industrial Average lost 1.8 per cent at 17,501.65. Closer to home, Saudi Arabia’s Tadawul gave up 2.9 per cent on Monday after assurances over King Abdullah’s health failed to calm investors.

“There’s a global drop across most asset classes, and we’re becoming part of that,” said Nabil Al Rantisi, the managing director of brokerage at Menacorp in Dubai. “I don’t think it has anything to do with local margin calls anymore. It’s a global correction with US, European and Asian markets.

“Oil isn’t stabilising and it keeps putting pressure on our market and sentiment, and as long as it doesn’t stabilise, our market won’t stabilise either.”

Murban, sold by Abu Dhabi National Oil Company and exported out of the Jebel Dhanna and Fujairah ports to Asian markets, lost 10.9 per cent yesterday to US$45.76 a barrel.

The declines come after Brent crude dropped 5 per cent on Monday to a low of US$52.66.

Non-oil companies are taking short positions on the US futures and options market, betting on a continued downturn on energy prices. The net short position in the US crude oil futures and options markets has increased from 15 million barrels in August to more than 77 million barrels last week, Reuters reported yesterday.

“All these factors point out that it’s going to be long before a recovery,” Mr Farhat said.

Property and financial stocks led the declines in Abu Dhabi.

Aldar Properties fell as much as 8.3 per cent to Dh2.19 at the open. By the close they recovered slightly, down by 3.7 per cent to Dh2.30. National Bank of Abu Dhabi dropped as much as 6.8 per cent to Dh12.90, but failed to recover by the close.

Similarly in Dubai, Emaar Properties sank 8.9 per cent to Dh6.28 at the open. By the end of the session, Emaar’s shares were down 5.8 per cent to Dh6.50. But other stocks failed to recover. Dubai Financial Market, the shares of the only publicly-listed exchange in the region and whose income is derived from trading activity, dropped 8.1 per cent to close at Dh1.69.

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