Arabtec tumbles to its daily 10% limit, driving Dubai's main index down by 6% at close on Sunday
Dubai's stock market plunged on Sunday as builder Arabtec triggered another sell-off, while investors in Saudi Arabia and Qatar were disappointed by fresh quarterly earnings reports.
The slide in Dubai illustrated the extent to which the market remains dominated by a single stock, its most heavily traded counter in recent weeks, which is prey to wild swings because of frenzied trading by retail investors and short-term speculators.
Arabtec plunged its daily 10 percent limit after Aabar Investments, one of its major shareholders, did not confirm a media report which said Aabar was in talks to increase its stake. Dubai's main index closed 6.0 percent lower.
"It is Arabtec which is affecting the market," said Shakeel Sarwar, head of asset management at Securities and Investment Co in Bahrain.
"This is crazy volatility...The main issue is that the market does not have depth, it's totally at the mercy of retail investors and speculators."
Samer Mardini, vice president for fixed income and financial officer at SJS Markets, said speculators "trying to play on Arabtec rumours and news to drive the equity market in their favour" had pushed the market to "a non-rational level".
Arabtec jumped last week on speculation that Aabar would raise its stake from the current 18.94 percent. The bourse suspended the stock on Thursday after Bloomberg reported that Aabar was in talks to buy part of the 28.85 percent stake owned by Arabtec's former chief executive Hasan Ismaik, who abruptly resigned last month.
But Aabar issued a statement on Sunday that did not confirm or deny the report, saying it was studying different options for its stake and that any talks on a deal would remain confidential. Disappointed retail investors dumped Arabtec as it resumed trading, along with other stocks.
Developers Union Properties and Deyaar, and contractor Drake and Scull, also closed limit-down. Blue chip Emaar Properties dropped 4.5 percent.
A report by consultancy JLL saying that Dubai's property price growth had slowed in the second quarter may have added to pressure on the sector - even though slower price rises are probably good news, because they mean less chance of the real estate market overheating and then crashing again.
Sales prices for residential property grew 6 percent quarter-on-quarter in the second quarter, down from 10 percent in the previous quarter, according to JLL.
The sell-off also hit property stocks in Abu Dhabi. The emirate's biggest developer, Aldar Properties, plunged its 10 percent limit, as did RAK Properties and Eshraq Properties. Abu Dhabi's index closed 2.4 percent lower.
Both Dubai and Abu Dhabi rallied last week, partly on expectations of strong second-quarter results, said Sanyalak Manibhandu, manager of research at NBAD Securities in Abu Dhabi. Now investors are abandoning such bets and taking profits on companies that have already reported their results.
"Now people are basically saying: let's just step back for a moment," Manibhandu said. "It's been a six-day rally, I think it's time for a pause."
Bourse operator Dubai Financial Market fell 8.9 percent after it announced it had more than tripled its second-quarter net profit. Lender Union National Bank fell 2.7 percent despite reporting a profit that was slightly ahead of analysts' forecasts.
Saudi Arabia's main index slid 0.5 percent, dragged down mostly by three companies that reported their quarterly earnings before the opening: Saudi Industrial Investment Group (SIIG), Dar Al Arkan and Saudi Basic Industries (SABIC).
SIIG dropped 4.9 percent after its second-quarter profit missed the estimate of SICO Investment Bank by a third.
Dar Al Arkan fell 3.3 percent, having reported a 17 percent rise in second-quarter net income to SR121.3 million ($32.3 million). Six analysts polled by Reuters had forecast, on average, that it would record a net profit of SR209.8 million.
SABIC slipped 0.7 percent after reporting a 7 percent rise in second-quarter net income, in line with estimates.
Qatar's bourse fell 1.0 percent, ending a four-day leg up. Al Khaliji Commercial Bank lost 1.8 percent after reporting a 5.9 percent decrease in second-quarter net profit.
But Gulf International Services, which said on Sunday its unit had won a 1.2 billion riyal ($330 million) rig supply contract from Qatar Petroleum, jumped 2.9 percent.
Elsewhere, shares in Kuwait Projects Co (KIPCO) rose 2.8 percent after the company said it has received an offer from an unnamed investor for its 60.5 percent stake in pay-television operator OSN. KIPCO did not disclose the value of the offer. Kuwait's index slipped 0.2 percent.