Gulf markets continue their losing streak

Dubai gave up more than three per cent after an early rally by Emaar ran out of steam.

The UAE market has breached support levels and is expected to fall further.

Gulf markets suffered severe losses yesterday, led by the Dubai Financial Market (DFM), which had been expected to rise after a promised boost by Emaar. The property firm announced on Saturday that it planned to buy back up to 10 per cent of its shares next month because it saw the stock as undervalued. The news initially lifted the company's shares and the market as a whole. In early trading Emaar was up more than six per cent, lifting the DFM by two per cent. By the close of play, however, Emaar was down 3.04 per cent at Dh7.34 (US$2), mirroring the market as a whole, which ended down 3.38 per cent. Apart from Emaar, the biggest drivers downwards were the mortgage finance firm Tamweel, down 10.04 per cent at Dh4.21, and Dubai Islamic Bank (DIB), falling 5.47 per cent at Dh6.05. Both have been mired in recent controversy - current and former Tamweel executives have been arrested as part of a police investigation into alleged corruption within the Dubai housing market. DIB's stock was suspended for most of Thursday, the last day of trading, until a report was confirmed that assets of Plantation Holdings, a property developer, had been seized to recover bad debts. Across the GCC markets fell, partly prompted by the Saudi Tadawul's four per cent drop on Saturday. Doha plummeted 6.16 per cent, Kuwait lost 2.1 per cent, falling below the 13,000 level for the first time in nine months, while Abu Dhabi lost 2.71 per cent. The Doha fall was particularly severe, as losses were seen across its market in every sector. Mohammed Ali Yasin, the chief executive of Shuaa Securities, said the market declines over the summer had now turned into "panic selling". He called on the Government and its agencies to provide short-term market support for the sake of stability, citing as a precedent reports that the state-owned Kuwait Investment Authority was about to do just that in its home bourse. "In the GCC, local agencies and governments need to move in slowly - directly or indirectly," he said. "They are the ones with an abundance of liquidity and would be able to slow down the panic in the markets and create suitable conditions for normal forces to start to process again." Mr Yasin blamed short sellers, who "have an interest in selling the markets even lower". The international banking crisis is continuing to exert its pressure on the GCC markets, with the Lehman Brothers situation on a knife-edge yesterday. The US authorities were yesterday searching for a buyer of the country's fourth-biggest investment bank, in a dash to announce a deal before the Asian markets open today and cause more equity damage. If no buyer is found by the time markets open today, large equity falls in the developed world can be expected, which in turn will prompt more margin calls and push international investors to unwind more GCC positions. Shiv Prakash, an equity analyst at Mac Capital Advisors, said the UAE market had now breached support levels and he expected them to fall even further in the coming weeks. Mr Prakash said it was Emaar that had pushed the DFM lower, despite the hopes vested in it; he said it "was like the boy who cried wolf" - on several occasions in the past two years, Emaar had applied for share buy-back permission but had never used it. Now the market did not believe Emaar was going to do it this time, which meant its rally was short-lived. He said the UAE markets were now highly bearish, illustrated by the buy-back news: "This could not hold the selling pressure, and created more panic in the markets. We witnessed selling all over in every counter." Mr Prakash added that the problem was that Emaar had not specified a price for its buy-back, which would have encouraged investors and provided stability. However, now the lead-up to Emaar's start date of Oct 1 would "create more uncertainty". [e-mail]