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DFM Shares Fall on Slowdown Worries

DUBAI - Dubai shares on Monday fell for a second straight session on mounting worries over the financial health of companies amid expectations of a slowdown in the UAE economy as well as declining growth in major economies.

“We haven’t had a break from all the negative news, so understandably there was a lot of fence-sitting. That’s why the markets were simply unable to hold on to gains,” said Sherif Abdul Khalek, institutional trading manager at Beltone Financial.

Economic growth in the UAE will slow to 2.7 per cent in 2009 and 3.5 percent in 2010, said Standard Chartered in a report.

On Thursday, UAE central bank governor Sultan Nasser Al Suwaidi said UAE’s gross domestic product will fall to low single digit levels in the next two years.

Before the global financial crisis started to unravel in 2007, UAE, the world’s fifth largest oil exporter and the second largest economy in the Middle East has seen unprecedented growth in recent years, backed by high oil prices and a booming real estate sector. The property sector is bracing for a slowdown though with liquidity drying up as banks tighten lending criteria.

“There was a positive reaction at the start of trading, mainly due to talks Citigroup is trying to work out an $8-billion facility for Dubai corporates. But profit-taking set in as fear of disappearing liquidity , especially if banks do not lend to corporates, will leave companies vulnerable to systemic risks,” said Krishna Murthy, CEO of Dubai International Securities.

The Dubai Financial Market index shed 0.6 per cent to 1,948.94 as decliners outpaced advancers 18 to 7. The Abu Dhabi Securities Exchange main index edged down 0.7 per cent. “Since the start of the last quarter, we have gradually seen foreign institutional investors withdrawing from the local equities markets, but that seemed to have accelerated in mid-November. Markets these days are also now being dominated by retail investors who are in it only for the short-term opportunities,” said Khalek. Investors are likely to continue shying away from the market in the next few weeks, said Alik Han, executive director of Arqaam Capital. “We can expect volumes to continue shrinking. It is increasingly looking like investors are waiting for fourth quarter numbers as a catalyst to decide on whether to allocate funds into UAE markets or to continue remaining on the sidelines.”

rocel@khaleejtimes.com