Dubai Stocks Drop on Speculation Rally Overdone Given Cyprus

Dubai’s shares dropped to the lowest level in almost a week on speculation a rally this quarter was overdone as Cyprus struggled to prevent a financial collapse, stoking concern Europe’s debt crisis is worsening.

Emaar Properties PJSC (EMAAR), the developer of the world’s tallest skyscraper, decreased 1.1 percent, trimming the surge this year to 42 percent. Dubai-based phone company Du lost the most since December. The benchmark DFM General Index (DFMGI) retreated 0.6 percent to 1,897.62, the lowest level since March 18, at the close in the emirate. The measure has rallied 17 percent in the first quarter, making it the best performer in the Persian Gulf.

The MSCI Emerging Markets Index (MXEF) of developing nation stocks dropped 2.6 percent last week after the European Central Bank said it may cut off Cyprus banks from emergency funds. Cyprus’ attempt to secure a bailout from Russia was rebuffed. Dubai, one of seven sheikhdoms that make up the United Arab Emirates, relies on trade, tourism and property for growth.

“There is slight fear, but not a dominant one,” said Nabil Farhat, partner at Abu Dhabi-based Al Fajer Securities. “The general outlook is still positive, however we are seeing a technical correction and should experience some volatility during the correction.”

Economic Recovery

Dubai expects the economy to expand more than 4 percent this year, driven by a tourism boom and a recovering property market, according to government estimates. The emirate announced plans in November for a development boasting the world’s biggest shopping mall and gardens larger than London’s Hyde Park. The city’s stock market rally in 2013 compares with a decline of 3.8 percent for emerging market stocks.

About 202 million shares traded in Dubai today that’s more than the 12-month daily average of 157 million, according to data compiled by Bloomberg. The DFM General Index is valued at 10.6 times estimated 2013 earnings, compared with a multiple of 11.2 for the Bloomberg GCC 200 Index. (BGCC200)

Emaar, the best-performing stock on Dubai’s index this year, fell to 5.33 dirhams, the lowest close since March 5. The company derived 28 percent of revenue from its international operations in the fourth quarter, according to data compiled by Bloomberg. Du, the company formally known as Emirates Integrated Telecommunications Co. (DU) whose stock has surged 39 percent in 2013, decreased 1.6 percent, the most since Dec. 13, to 4.85 dirhams.

Elsewhere in the Middle East, Abu Dhabi’s ADX General Index (ADSMI) decreased less than 0.1 percent and Bahrain’s measure slipped 0.2 percent. Oman’s MSM30 Index climbed 0.6 percent and Kuwait’s gauge increased 0.2 percent. Saudi Arabia’s Tadawul All Share Index (SASEIDX) gained 0.5 percent at 1:52 p.m. in Riyadh. In North Africa, Egypt’s benchmark EGX 30 Index (EGX30) rose 0.4 percent.

Israel’s TA-25 Index (TA-25) advanced 0.3 percent. The yield on the government’s benchmark 4.25 percent bonds due 2023 fell four basis points, or 0.04 percentage point, to 3.96 percent.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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