Dubai Stocks Index Heading for First Quarterly Loss Since 2012

Dubai stocks extended declines, heading for the first quarterly slide in two years, as some investors judged shares too expensive even after the index entered a bear market last week. Qatar’s measure also fell.

The DFM General Index (DFMGI) slid 2.4 percent to close at 4,123.61, bringing the retreat since the end of March to 7.4 percent and on course for the first quarterly loss since the three months ending June 2012. Arabtec Holding Co. (ARTC), the United Arab Emirates’ biggest listed construction company, tumbled 6.5 percent. Emaar Properties PJSC (EMAAR), the stock with the highest weighting on the gauge, decreased 2.8 percent. Qatar’s QE Index dropped 1.2 percent to the lowest since March 31.

Dubai’s index entered a bear market on June 23 after dropping 20 percent from a high in May, stoking concern that five years after the global financial crisis the real-estate recovery in the Middle East business hub has become overblown. Today’s losses cut its estimated price-earnings ratio to 14, from a peak of 19 in May. That compares with a ratio of 11 for the MSCI Emerging Markets Index, according to data compiled by Bloomberg.

“Dubai’s price-to-earnings ratio became unrealistic,” Samer Mardini, a Dubai-based vice president at SJS Markets Ltd., said in a telephone interview. “The index will probably fall to at least MSCI levels.”

Dubai shares entered a bull market in January 2012 amid a real-estate recovery and boom in trade and tourism. The benchmark index’s 14-day relative strength index dropped to 35, from 53 at the end of last month. A level below 30 typically indicates to analysts the stocks are oversold and poised for a rebound.

MSCI Upgrade

The U.A.E.’s exchanges, along with Qatar’s, began trading as emerging markets this month after index provider MSCI Inc. reclassified them in June 2013. Dubai’s gauge more than doubled almost a year after the upgrade on bets the change will lure investors managing about $8 trillion in assets.

Arabtec is among the nine U.A.E. equities included in the MSCI Emerging Markets Index. The builder helped spark the Dubai selloff as its second-biggest investor Aabar Investments PJSC cut its stake this month. It’s chief executive officer has since resigned, and the company said it has dismissed a ‘‘limited” number of employees.

Arabtec’s shares retreated to 2.90 dirhams. Emaar, which has the highest weighting on Dubai’s index, fell to 8.73 dirhams.

Dubai’s main index has now entered a bear market eight times since 2008, data compiled by Bloomberg show.

“There are some noticeable structural differences between where Dubai is today and where it was six years ago,” Ali Khalpey, London-based head of equities at Exotix Partners LLP, said in an interview June 26. “People actually live in Dubai now, before they were just investing in it.”

Holy Month

Saudi Arabia’s Tadawul All Share Index slid 0.6 percent to 9,513.71, the lowest since April 16. Abu Dhabi’s ADX General Index (ADSMI) lost 0.4 percent, also headed for the first quarterly decline in two years. The Bahrain Bourse All Share Index retreated 0.3 percent. Oman’s MSM 30 Muscat Securities Market Index advanced 0.2 percent. Kuwait’s SE Price Index was little changed.

Trading volumes declined across the region as the holy month of Ramadan begn, when Muslims fast from dusk till dawn. Most employees in the six-nation Gulf Cooperation Council work reduced hours throughout the month.

In Dubai, investors traded almost 235 million shares today, the lowest since August, compared with a 12-month daily average of 732 million. Volume on Abu Dhabi’s gauge was 66 million shares compared with a one-year daily average of 608 million, according to data compiled by Bloomberg.

“The low turnout from retail investors was expected given that it’s the first day of Ramadan,” Nayal Khan, head of institutional sales and trading at the Naeem Holding brokerage in Dubai, said by e-mail. “I would expect sideways trade from here on and think investors will use wait and see approach for the time being.”

FIFA Investigation

Qatar’s shares fell for a fifth day amid lingering concern it may lose the right to host the 2022 soccer World Cup. Shariah-compliant lender Masraf Al Rayan led the decline with a 3.1 percent retreat.

A FIFA panel looking into the awarding of the tournament will issue its findings in July into the possibility of corruption. The investigation follows a report in the U.K.’s Sunday Times earlier this month that alleged soccer officials received payments in return for support for Qatar’s bid. The gas-rich nation, which plans to spend $200 billion ahead of the games, has denied the allegations.

“The closer we get to the issuance of that report, the more uncertainty we will see in the market,” Sebastien Henin, who oversees $90 million as head of asset management at the National Investor in Abu Dhabi, said by telephone.

Share Value

In Egypt, the benchmark EGX 30 Index (CASE) lost 0.3 percent in a shortened trading day implemented throughout Ramadan. About 227 million Egyptian pounds ($32 million) of stocks traded.

EFG-Hermes Holding SAE increased 0.4 percent after the investment bank said HC Securities & Investment, an independent adviser hired to examine an offer to buy a 20 percent stake by billionaire Naguib Sawiris and Beltone Financial Holding Co., valued the shares at 22.93 pounds each. Sawiris and Beltone said after the market closed that they won’t raise their offer price from 16 pounds a share.

Israel’s benchmark TA-25 index advanced 0.1 percent to 1,385.31 at 4:11 p.m. in Tel Aviv. Delek Group Ltd. increased 0.6 percent to 1,438 shekels as the company raised 355 million euros ($485 million) from the sale of a unit in Europe.

The yield on Israel’s benchmark bond due March 2024 gained 1 basis point, or 0.01 of a percentage point, to 2.8 percent. The yield has declined 61 basis points so far this quarter.

To contact the reporters on this story: Sarmad Khan in Dubai at skhan170@bloomberg.net; Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net James Doran

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