Dubai shares soared the most in more than nine months, ending a three-day slump that pushed the gauge into a bear market, after some investors judged the declines were exaggerated.
The DFM General Index jumped 6.1 percent, the most since Sept. 10, to 4,253.04 at the close. Emaar Properties PJSC, the developer with the highest weighting on the index, climbed 7.1 percent. Arabtec Holding Co., the United Arab Emirates’ largest-listed builder, increased 5.1 percent after declining almost the maximum permitted in each of the previous three days. Stocks in Abu Dhabi also rebounded.
“The correction was severe enough to create new opportunities,” Akber Naqvi, an executive director at Dubai-based Al Masah Capital Ltd., which manages $545 million, said by e-mail. “Some valuations are much more attractive and some entry points are more appealing.”
The benchmark index’s 14-day relative strength index rose to 37.4, from 27.5 yesterday. A level below 30 typically indicates to analysts the stocks are oversold and poised for a rebound. The DFM gauge entered a bear market two days ago after stocks declined 20 percent from a peak 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. Shares had soared more than 250 percent since June 2012, led by property and construction companies.
Arabtec, which lost 27 percent in the first three days of the week, said in a statement to the bourse today that investors should focus on the company’s performance. People familiar with the matter said earlier this week that the chief operating officer, chief information officer and chief risk officer were fired, following the departure of Chief Executive Officer Hasan Ismaik. Arabtec yesterday confirmed it dismissed staff.
Foreign investors were net buyers of Dubai stocks today. They purchased shares valued at 1.066 billion dirhams ($290 million) and sold 1.036 billion dirhams, according to data from the DFM. U.A.E. nationals bought stocks valued at 1.003 billion dirhams and sold 1.034 billion dirhams.
“Foreign investors are taking advantage of margin calls” as local investors are “forced to sell leveraged positions,” Hisham Khairy, the Dubai-based head of institutional trade at Mena Corp. Financial Services LLC, said by e-mail.
Abu Dhabi’s ADX General Index, which lost 3.3 percent yesterday, the most since January 2011, increased 1.9 percent today, the most since May 29. In Dubai, Arabtec’s shares climbed to 3.28 dirhams. Emaar rose the most since May 29 to 9.10 dirhams.
“We still have a long way to go before we can call this a definite reversal,” Naqvi said. “Long-term investors and institutions will certainly be active at these levels, but they will be selective.”
This week’s declines prompted members of the U.A.E.’s Federal National Council, an advisory authority that represents the interests of the Emirati population, to call for an investigation, Alkhaleej newspaper reported today.
“The law regulating financial markets in the U.A.E. is old,” Ahmed Mohammed Rahma al-Shamsi, an FNC member said in a telephone interview today. “The markets have changed now and I demand that new legislation is put in place about transparency, legislation that includes penalties for breaching it, regulates announcements, and the transactions of the board members in a more accurate way.”