Dubai Exchange Rout Sends Shares Back to March as Emiratis Sell

Dubai's stocks fell for a fourth day, retreating to the lowest level in almost four months, as local investors dumped shares on speculation the market's 22 percent slide last month has further to run.

The DFM General Index (DFMGI) lost 1.3 percent to 3,892.31 at 12:33 p.m. in the emirate, the lowest since March 13. The gauge posted its biggest monthly loss since November 2008 during June after it entered a bear market last week. Emirati investors were net sellers of stocks every trading day from June 16 through yesterday, according to data on the exchange’s website.

“The majority of local investors are momentum traders compared to international investors and they would sell on the way down and buy on the way up,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, which manages $545 million, said by e-mail. “Right now they are selling. Nevertheless, this significant selloff is presenting opportunities for those capable of going against the grain.”

The U.A.E.’s exchanges, along with Qatar’s, began trading as emerging markets last 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. Bear markets in the emirate have previously lasted on average 139 days and produced a 34 percent decline in stocks. Abu Dhabi’s ADX General Index (ADSMI) declined 0.8 percent to 4,514.64.

Margin Call

The Dubai market’s relative-strength index fell to 29.9 today from 53.7 at the end of May. A level below 30 typically indicates to analysts the stocks are oversold and poised for a rebound. None of the regularly traded stocks in Dubai’s 30-member benchmark gauge were trading above their 50-day moving average price June 29 for the first time since June 2012, according to data compiled by Bloomberg. It was unchanged yesterday.

The index is falling amid speculation investors who bought shares with borrowed money are selling to cover their positions, so-called margin calls, Nayal Khan, head of institutional sales and trading at the Naeem Holding brokerage in Dubai, said by e-mail.

“Leveraged investors just hope that the market will rebound,” Khan said. “If they are only selling to meet a call, then the lower the market moves, the more calls will be made. It’s a vicious cycle with no relief in sight.”

’Volatile’ Market

Falling volumes are also impacting the market, Merhi said. Trading declined across the region after the holy month of Ramadan, when Muslims fast between dawn and dusk, started this week. Most employees in the six-nation Gulf Cooperation Council work reduced hours throughout the month.

“This makes prices more volatile as it takes a relatively smaller trade to move prices,” Merhi said.

Arabtec Holding Co. (ARTC), the U.A.E.’s biggest listed builder, fell 6.1 percent to 2.45 dirhams, the lowest since Jan. 20. Union Properties PJSC decreased 9.9 percent to 1.45 dirhams, the lowest since Jan. 28. Drake & Scull International slipped 8.2 percent to 1.24 dirhams, the lowest since Nov. 7.

To contact the reporter on this story: Sarmad Khan in Dubai at skhan170@bloomberg.net

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

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