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DFM Shares Retreat

The Dubai Financial Market Index ended 1.1 per cent or 19.30 points lower to 1,743.90, pulled down by losses in the property sector. The index jumped 7.7 percent on Monday, the first trading of the year, its best finish in more than seven weeks.

Abu Dhabi fared better, its gauge rose 1.2 per cent or 29.87 points to 2,555.54.

“Dubai saw some profit taking today after yesterdays strong performance. Given the recent volatility in the market, a two steps forward, one step back trend is not surprising as retail investors looked to lock in small gains,” said Matthew Wakeman, managing director of cash and equity-linked trading at EFG-Hermes.

Arabtec Holding, the country’s largest construction company which is building the world’s tallest tower in Dubai, plunged 9.6 per cent to Dh2.34 on news that Meydan LC has cancelled a $1.3 billion racecourse construction deal with the company.

Dubai-based Meydan LLC last year commissioned a 50-50 joint venture between Malaysian construction company WCT Engineering Berhad and Arabtec to build the racetrack. Meydan reportedly scrapped the contract because of “non-adherence” to the agreed time schedule for the construction.

Arabtec confirmed the contract’s cancellation effective January 9, 2009 in a disclosure to the stock exchange and said “the company expressed its regret for this decision by Meydan.”

“What has been overlooked here is that Arabtec in the last five trading sessions actually gained 60 per cent. So that bit of a bad news breaking out was taken as an excuse to take some money off the table,” said Ali Khan, executive director of Arqaam Capital.

The Arabtec setback also revived worries about the faltering Dubai property sector which is still reeling from a liquidity squeeze, said Vyas Jayabhanu of Al Dhafra Financial Brokerage.

“A big factor is that the real estate sector is closely tied to the banking system. Investors want to see the sustainability of ongoing projects.”

A pullback in property companies led by index heavyweight Emaar Properties also weighed on the index. The Middle East’s biggest real estate company dropped 2.3 per cent to Dh2.53.

Deyaar Development resumed its slide after jumping 14 per cent Monday, shedding 3.5 per cent to Dh0.55. Union Properties edged down 3.6 per cent to Dh0.79.

Abu Dhabi outperformed Dubai where six of its nine sectoral indices advanced.

“The financial stability of Abu Dhabi companies is significantly different than in Dubai, there is not much concern on that. So there is more confidence in Abu Dhabi,” said Robert McKinnon, managing director of research at Al Mal Capital.

Real estate stocks led gainers, paced by Sorouh Real Estate, UAE’s third biggest property company by market value rose for six consecutive trading sessions to end up 6.4 per cent to Dh3.71.

Abu Dhabi National Hotels jumped 10 per cent to Dh3.65. The next few trading sessions may see some more corrections in the run-up to the start of the earnings season, said Wakeman.

· rocel@khaleejtimes.ae