Dubai Shares End Six-Day Rally on Arabtec; Israel Slumps

Stocks in Dubai fell the most in a month after a state-run investment company failed to give reassurance about increasing its support for Arabtec Holding Co. (ARTC), the United Arab Emirates’ biggest publicly traded builder. Israel’s index slid as the army expanded operations in Gaza.

The DFM General Index (DFMGI) sank 6 percent, the biggest decline since June 24, to close 4,609.67 and bringing the longest rising streak since April to an end. Arabtec tumbled the maximum allowed in a day after it resumed trading following its suspension July 17. Aabar Investments PJSC’s talks on its stake in the builder are “strictly confidential,” it said in a statement to the Dubai bourse today. Israel’s TA-25 Index dropped the most in a month.

“There is still no clarity on what is going on behind the scenes at Arabtec,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, which manages $545 million, said by e-mail. “Investors are understandably cautious on the name today until some concrete decisions are shared with the public.”

Arabtec’s shares, which fell 9.9 percent, the most since June 30, were halted from trading at the end of last week pending clarification of its ownership. Aabar is in talks to buy at least half of a 28.9 percent stake held by the construction company’s former Chief Executive Officer Hasan Ismaik, a person with knowledge of the situation said July 15.

The builder’s stock rose more than 70 percent this month to 4.46 dirhams after Chairman Khadem Al Qubaisi said July 2 Aabar may increase its holding. Arabtec was the most traded stock as volumes jumped to 1.5 times the three-month daily average.

Volatility

Aabar is negotiating a price of 5 dirhams to 6 dirhams a share, the person said. At the top end of that range, half of Ismaik’s 1.27 billion shares would be worth about $1.03 billion.

Dubai’s index, the best performing this year in dollar terms among more than 90 gauges tracked globally by Bloomberg, dropped 22 percent last month, on speculation Arabtec will lose Abu Dhabi government’s backing, its chief executive resigned and the company fired staff.

The DFM General Index is the second-most volatile market among more than 73 major indexes tracked by Bloomberg after Argentina. The gauge’s 30-day historical volatility, a measure of price swings, climbed to 55.3, near the highest level in more than four years. None of the index’s 30 members advanced today.

Shares of Emaar Properties PJSC (EMAAR), which have the biggest weighting on the index, tumbled 4.5 percent to 9.50 dirhams, the steepest drop since June 23. Deyaar Development PJSC declined the most allowed in a day to 1.18 dirhams.

“The market volatility will continue as long as we have ambiguity lurking around Arabtec,” Ahmed Shehada, head of advisory and institutions at NBAD Securities LLC, the U.A.E.’s fourth-biggest brokerage by trading volume, said by phone. “It was really a flip of the coin as Arabtec resumed trading without any further clarity from Aabar.”

Turkey Protests

Shares in Israel sank as the country’s military expanded its ground offensive into the Hamas-controlled Gaza Strip, where the death toll among Palestinians tops 400.

Troops moved into Gaza after air strikes failed to end rocket attacks that reached farther into Israel than ever before, and Hamas and other militants rejected an Egyptian truce proposal. United Nations Secretary General Ban Ki-moon visits the region today in an effort to broker an end to the fighting.

The benchmark TA-25 (TA-25) Index decreased 1 percent to 1,387.61. Delek Group Ltd. and its oil- and gas-exploring units Delek Drilling-LP and Avner Oil Exploration LLP, partners in the Leviathan natural gas field off Israel, declined after Israel told diplomats’ families to leave Turkey on July 18, following “violent demonstrations” over the Gaza offensive in Istanbul and Ankara.

“Turkey is supposed to be one of the two main customers of Leviathan gas after Egypt,” Noam Pincu, an analyst at Psagot Investment House Ltd. in Tel Aviv, said by telephone today.

Borrowing Costs

Shares of Delek Group fell the most since February, dropping 2.8 percent to 1,348 shekels. Delek Drilling slid 1.8 percent, and Avner 1.7 percent. The yield on the benchmark 10-year bond rose four basis points, or 0.04 of a percentage point, to 2.84 percent.

In Egypt, the EGX 30 Index (CASE) declined 0.7 percent. The nation’s local borrowing costs surged after the central bank raised interest rates last week by 1 percentage point to 9.25 percent (EGBRDRAR) for the first time since March 2013. The government raised 5.5 billion Egyptian pounds ($769 million) today, with the average yield on three- and nine-month treasury bills jumping 105 basis points and 113 basis points, respectively, over last week’s yields.

Preempting Inflation

The regulator’s decision preempts an expected rise in inflation after the government cut fuel subsidies and raised taxes on cigarettes and alcohol to narrow the budget deficit, central bank sub-governor Rania Al-Mashat said in a statement.

“There’s a real contradiction between the interest rates increase and efforts to cut the budget deficit,” Mohamed Kotb, managing director at Cairo-based Premier Investment, said by phone. “This won’t only back-fire negatively on yields, but also on private investment. There could have been more targeted measures taken to reduce the impact of inflation on the household sector.”

Abu Dhabi’s ADX General Index (ADSMI) sank 2.4 percent. Qatar’s QE Index lost 1 percent and Oman’s MSM 30 Index retreated 0.2 percent. Kuwait’s SE Price Index slid 0.2 percent. Saudi Arabia’s Tadawul All Share Index dropped 0.5 percent.

Saudi Basic Industries Corp. (SABIC) posted a 7 percent increase in second-quarter profit to 6.46 billion riyals ($1.72 billion) as output and sales at the world’s biggest petrochemicals maker increased. The average estimate of nine analysts was for a profit of 6.40 billion riyals, according to data compiled by Bloomberg. It’s shares dropped 0.7 percent to 115.23 riyals, the lowest since July 1.

To contact the reporters on this story: Sarmad Khan in Dubai at skhan170@bloomberg.net; Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net; Ahmed A. Namatalla in Cairo at anamatalla@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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