Dubai’s benchmark stock index fell more than 10 percent from its 2013 high as the prospect of a military strike against Syria weighed on investor sentiment in the oil-rich Persian Gulf.
The DFM General Index (DFMGI) dropped 3.7 percent, making it the biggest decliner among 94 benchmarks tracked by Bloomberg globally, to close at 2,396.79 in Dubai. The measure has plunged 13 percent from its Aug. 25 high, entering the so-called correction today. Dubai Investments PJSC (DIC), which holds stakes in more than 40 businesses, tumbled 5.3 percent, while discount carrier Air Arabia PJSC (AIRARABI) fell for a third day.
U.S. President Barack Obama yesterday won support from two top House Republicans for military action against Syria as he seeks Congressional approval for his plan to punish the regime of President Bashar al-Assad for alleged use of chemical weapons. Shares in Dubai are the best performing benchmark in the world this year after Ghana as the Persian Gulf business hub’s economy recovers from the global financial crisis.
“The 50 percent year-to-date rally adding to the uncertainty of the Syria issue will definitely drive investors to lighten up and reduce exposure to local stock market until things are clearer,” Tariq Qaqish, a Dubai-based fund manager at Al Mal Capital PSC, said in an e-mail.
The Middle East accounted for about 35 percent of global crude production in the first quarter of this year, according to the International Energy Agency. Syria borders Iraq, the biggest producer after Saudi Arabia in the Organization of Petroleum Exporting Countries. Dubai and Abu Dhabi are part of the United Arab Emirates, the fourth-biggest OPEC producer.
The world’s five worst performing benchmarks were from the Persian Gulf today. Oman’s gauge lost 2.9 percent, Kuwait’s dropped 2.6 percent, Abu Dhabi’s fell 2.3 percent and Saudi Arabia’s Tadawul All Share Index lost 2.2 percent. Qatar’s Index retreated 1.9 percent, while Bahrain’s All Share Index was little changed.
The U.S. Senate Foreign Relations Committee is scheduled to vote today on a use-of-force resolution that sets a 90-day limit on military action. President Vladimir Putin said Russia will only consider supporting a United Nations resolution authorizing military strikes if there’s conclusive proof it used chemical weapons.
Dubai Investments declined to 1.61 dirhams, while Air Arabia lost 6.2 percent to 1.22 dirhams.
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