Faltering Dubai bourse on edge of bear territory

Markets Update: Bears are stalking the halls of the Dubai Financial Market, as growth during the first few months of the year evaporates, and stocks sink.

The Dubai Financial Market General Index lost 2 per cent yesterday. Ali Haider / EPA

If you go down to the Dubai stock market today, you may be in for a surprise.

Bear sightings have become more frequent in the area as global oil prices sink and share values dwindle.

The Dubai Financial Market (DFM) General Index sank 2 per cent to 1,441.80 yesterday, hitting a five-month low and leaving the emirate's benchmark on the cusp of becoming a bear market - defined as a decline of 20 per cent over a given period.

Compared with the soaring gains at the start of the year, market sentiment has taken a decided turn for the worse, said Talal Touqan, the head of research at Al Ramz Securities.

"We've developed into a bearish mood now," he said. "Trading activity has started to slow down, volumes are low and markets are dropping."

The fall in market values starting in early March has left the DFM index positioned only 38 points away from bear territory.

Only a few months ago, the DFM was in the midst of a bull run in which the index climbed as much as 34.8 per cent from a low reached in January.

It emerged last month that an accumulation of Arabtec shares by Abu Dhabi's Aabar Investments had been behind about half of the DFM's gains so far this year.

But now, international events are weighing on local markets, with the fall in oil prices proving the biggest burden for Gulf investors, said Eric Swats, the head of asset management at Rasmala Investment Bank.

"With China slowing down, Europe on the verge of recession or something nastier, and the US not growing so fast, really, oil prices should correct," he said.

The Abu Dhabi Securities Exchange General Index declined 0.5 per cent to 2,426.82 yesterday. It has fallen 8.1 per cent since markets peaked this year.

Local markets have limped after a slump in oil prices to below US$100 per barrel raised fears for the wider Gulf economy.

Oil prices headed down on Friday, with Brent crude futures falling $3.30 to $83.23 per barrel and Nymex crude shedding $3.32 to reach $83.23 per barrel.

While many investors had ploughed into local equities during the first few months of the year, encouraged by about Dh5 billion ($1.36bn) of dividends distributed by companies, most investors had not recycled these earnings back into local stock markets, said Mr Touqan.

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