Risks Mount for Dubai Stocks as Arabtec Rallies Most Since 2009

  • U.A.E. builder climbs 8% Thursday to cap best week in 7 years
  • Dubai's index was battered amid an Arabtec-led selloff in 2014

Dubai stocks may be at the mercy of a company that’s trading about 70 percent above analysts’ estimates.

For a fifth straight day, trading on Arabtec Holding Co. has determined the DFM General Index’s direction, with the 280 million shares exchanged on the stock on Thursday accounting for more than half of the gauge’s volume. The company rose four out of five days this week, closing at 1.62 dirhams -- well above analysts’ 12-month consensus of 96 fils.

The spike in trading was triggered by rumors Arabtec’s former Chief Executive Officer Hasan Ismaik was increasing his stake in the company. Dubai bourse confirmed on Tuesday that he boosted his holdings, adding fuel to a rally that helped lift a majority of the DFM gauge’s 36 members. The last time Ismaik made headlines for buying Arabtec’s shares was in the second quarter of 2014, when the price soared to a record before plummeting 65 percent.

Price Estimates

The difference between Arabtec’s trading price and analysts’ 12-month price estimate is 66 fils, which would constitute a 41 percent slump as of Thursday. None of the seven analysts surveyed by Bloomberg has a buy rating on Arabtec.

Overbought Signal

Arabtec’s 14-day relative strength index had surpassed 80 on Tuesday, and closed at 71 on Thursday. A level above 70 indicates to some technical analysts that a security is overbought and poised to decline.

Index Correlation

In 2014, Arabtec shares plunged amid a reshuffle of senior management and investor concern the company was losing Abu Dhabi-government support. The collapse helped trigger a wider selloff, wiping a fifth from Dubai’s benchmark index and sending it into a bear market.