Dubai shares drop most since Jan on US downgrade

Arabian Gulf shares tumbled, sending Dubai’s index down the most since January, after Standard & Poor’s cut the US’s credit rating for the first time.

Emaar Properties, developer of the world’s tallest tower, slumped 6.6 percent. Arabtec Holding Co, retreated the most since March after it said second-quarter profit dropped 74 percent.

The DFM General Index lost 5.2 percent, the most since January 30, to 1,461.76 at 10:17 am in Dubai. The measure has plunged 14 percent from this year’s high in April, entering a so-called correction. Saudi Arabia’s Tadawul All Share Index retreated 5.5 percent on Saturday, the most since March 1.

Aldar Properties slumped to the lowest intraday level on record after Abu Dhabi’s biggest real-estate company reported a second-quarter profit that missed analysts’ estimates.

The shares tumbled as much as 7.8 percent to AED1.18, the lowest intraday level since April 2005, when the company’s shares started trading. They were at AED1.21 as of 11:52 am in Abu Dhabi.

Aldar reported a second-quarter profit of AED127.3m ($34.7m) after a loss of AED475.3m a year earlier. The mean estimate of five analysts was for a profit of AED153m, according to data compiled by Bloomberg.

Regional markets are being “affected by the very negative international lead from the U.S. and the Saudi performance yesterday,” said Samer Darwiche, a financial analyst at Gulfmena Investments in Dubai. “Correlation between the foreign markets and Middle East and North African markets is high, especially with the lack of catalysts for the region.”

S&P downgraded the US’s AAA credit rating on August 5 one level to AA+, while keeping the outlook at “negative.” The rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, the New York-based firm said.

US stocks and European stocks posted their biggest weekly loss since November 2008. The S&P 500 plunged 7.2 percent and the Stoxx 600 Europe Index tumbled 9.9 percent.

The Islamic holy month of Ramadan, when Muslims fast from sunrise to sunset and business activity slows, started last week. About 29 million shares traded in Dubai so far on Sunday, compared with a 12-month daily average of 123 million shares, according to data on Bloomberg.

Emaar fell the most since March 2 to AED2.84. Arabtec, the UAE’ biggest construction company by market value, tumbled 7 percent, the most since March 15, to AED1.33.

Second-quarter profit dropped to AED28.97m ($7.9m) from AED111m a year earlier. The mean estimate of six analysts was for a profit of AED44m, according to data compiled by Bloomberg.

Oman’s MSM 30 Index decreased 0.8 percent and Abu Dhabi’s ADX General Index lost 2.4 percent. The Bloomberg GCC 200 Index of the region’s stocks declined 0.7 percent.