Dubai Financial Market drops sharply in response to Brexit turmoil

Both the DFM and Abu Dhabi index suffered falls after Britain's decision to leave the EU.

The Dubai Financial Market felt the effects of the Brexit when it opened. Reem Mohammed / The National

Dubai equities on Sunday suffered their worst day since January, as stocks across the Arabian Gulf plummeted after the UK’s shock decision to leave the European Union.

Market volatility across asset classes is forecast to continue both globally and locally, as markets struggle to come to terms with the implications of Britain’s Brexit vote.

UAE investors rushed to sell on Sunday morning following a rout of global equities on Friday, with just seven stocks gaining in value throughout the day.

The Dubai Financial Market General Index fell by 4.7 per cent in early trading, before regaining ground to finish 3.2 per cent lower at 3,258.17, its steepest one-day fall since January.

Shares in Abu Dhabi also opened 4.7 per cent lower, before recovering to close just 1.8 per cent lower.

“While first day effects may be limited, we expect more volatility for the remainder of this year as post-Brexit pains combine with political uncertainty in Europe and the US,” said EFG Hermes.

“Mena and global equity markets are likely to remain volatile for much of this year, and risks to growth now appear to be tilted to the downside. Central banks may try to calm markets, but political uncertainty will limit how much effect they have.”

The Brexit decision sent shock waves across global markets on Friday. About US$3 trillion was wiped off the value of shares across Europe, Asia and the US, even as bourses came off their lows in late trading.

The Euro Stoxx 50 closed 8.6 per cent lower, while the UK’s FTSE 100 index closed 3.1 per cent down. Banking stocks were particularly badly hit across Europe – France’s Société Générale plummeting 20.5 per cent and the UK’s Lloyds Banking Group finishing 21 per cent lower.

Sterling sank, ending Friday 6 per cent down against the euro and 8 per cent down against the dollar. Brent crude fell as much as 6.6 per cent before recovering ground to close at $48.41 a barrel.

Saudi Arabia’s Tadawul All Share Index opened 4.3 per cent lower, eventually closing down 1.1 per cent, its steepest fall in more than a month.

Brexit’s effect on the UAE economy is most likely to be felt across the real estate and tourism sectors, with a weakened pound and euro affecting holiday spending from visitors from the UK and the continent, as well as property purchases, according to Sebastien Henin, the head of asset management at The National Investor in Abu Dhabi.

“From a market point of view the vote may push the dollar higher and trigger increased volatility in emerging-market currencies,” he said.

“Investors may decide to pull back from emerging markets and they may, therefore, reduce their exposure to the GCC.”

Property and banking stocks bore the brunt of on Sunday’s sell-off in the UAE. In Dubai, Emaar Properties suffered its worst day for five months, ending down 4.6 per cent at Dh6.10, with Emirates NBD closing down 2.2 per cent.

NBAD and FGB were the worst affected stocks in Abu Dhabi, ending down 3.3 per cent and 2.8 per cent, respectively, while Aldar Properties finished 2.9 per cent lower.

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