Dubai Stocks Fall Most in World as Three-Day Arabtec Rally Ends

  • U.A.E. builder's rally cracks amid record trading volume
  • Arabtec drops most in 7 weeks after Bollinger break, RSI at 81

Dubai’s stocks fell the most in the world, as Arabtec Holding Co. ended a three-day rally to sink the most in almost seven weeks.

The United Arab Emirates’ biggest publicly traded construction company erased gains of as much as 13 percent to retreat 9.1 percent at the close, as traders exchanged a record 550 million shares. That ended a streak that sent the stock’s price to the highest level since October. The DFM General Index closed 1.9 percent lower, after earlier rising as much as 1.4 percent.

“It’s profit taking, with fear overcoming greed,” said Sanyalak Manibhandu, the Abu Dhabi-based head of research at NBAD Securities LLC who has target price for Arabtec 32 percent lower than its current price. “Following two to three days of gains, profit taking is inevitable, particularly as there has been no positive change” in fundamentals, he said.

Earlier this week, speculation that Arabtec’s former Chief Executive Officer Hasan Ismaik was boosting his stake in the company sparked a rally that helped lift Dubai’s stock gauge to the highest level since November. Even a company statement on Tuesday that said the stock’s advance was based on “no material news” failed to deter investors. In 2014, Arabtec was at the center of a selloff that wiped a fifth off the value of Dubai’s benchmark index.

Ismaik’s stake on Monday increased to 11.91 percent from 11.81 percent, according to the Dubai Financial Market.

Cracks Show

Arabtec’s 14-day relative strength index had surpassed 80 on Tuesday. A level above 70 indicates to some technical analysts that a security is overbought and poised to decline. The stock also traded above its Upper Bollinger Band, a signal it may drop.

Even after this week’s rally, Arabtec shares remained more than 75 percent percent below their peak in 2014. The nation’s real-estate industry is slowing as home values are hit by falling oil prices, tighter regulation and a strengthening dollar, to which the U.A.E.’s currency is pegged. Arabtec last month reported its first yearly loss.

“Retail investors are more easily drawn to rumors, speculation and intrigue,” said Akber Khan, who manages $850 million as senior director of asset management at Al Rayan Investment in Doha. Al Rayan has no exposure to Arabtec because of Shariah-compliance issues. Retail investors “generally pay greater attention to momentum over fundamentals,” he said.

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