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Thu 11 Dec 2014 12:41 PM

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Dubai stocks sink as panic selling spreads across Gulf

No end in sight unless oil price uncertainty removed - asset management chief

Dubai stocks sink as panic selling spreads across Gulf

Dubai's stock index tumbled on Thursday, heading for its biggest daily drop in five years, after Brent crude oil dropped to a fresh five-year low.

The emirate's main index sank 7.2 percent to 3,604 points, falling below major technical support at 3,731 points, its July trough.

Other Gulf markets were also bleeding. The main index in Abu Dhabi dropped 3.7 percent, Qatar was down 3.5 percent, Oman fell 2.8 percent and Kuwait slid 1.6 percent.

Saudi Arabia's index fell 2.7 percent in the opening minutes of trade.

"What we see is panic selling - people sell whatever they can irrespective of valuations," said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain.

"I don't see any reason for this to stop unless oil price uncertainty is removed."

The price of Brent tumbled on Wednesday to $63.56 per barrel on comments by Saudi Arabia's oil minister again implying that Riyadh would make no output cut. It ticked up early on Thursday but still traded below $65.

Economists do not expect growth in the big Gulf economies to be seriously hit if oil stays at current levels, because governments have huge fiscal reserves which they can use to maintain spending even if they run budget deficits.

But oil's quick drop is having a psychological impact on retail investors who dominate trading in the Gulf markets and who want to lock in profits after big gains in the past 18 months. In Dubai in particular, selling may be magnified by margin calls and investors raising money to repay bank loans which they took out to buy stocks on the way up.

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AAA 4 years ago

Properties, here we come !!

Simon 4 years ago

Exactly...and much much more. For those leveraged with debt...C/Cards/Car Loans/Bank Loans & Mortgages....its going to be a very tricky time if this stockmarket fall is sustained. The knock on effects will be felt across all sectors due to financial implications.

For those without any real debt leverage....you can look forward to a probable deflationary Dubai. For how long depends on how this Oil price crash and Stockmarket crash plays out. At certain price levels, companies will come under heavy monetary pressures and the trickle down consequences will not be good for many.

Its a wonder then why the Saudi's maintains its downward pressure on Oil price and has broken ranks to make sure the price is pushed lower. It doesn't help the surrounding GCC countries at all. You have to wonder what the agenda is...and who is behind it...

John 4 years ago

The house across the street, the house down the street is still up for sale and my maintenance man told me that there are houses for sale all over the area. Houses went up for sale after the Housing Fee was added to DEWA bills making the DEWA bills ridiculously high which makes it not advantageous to own a freehold house anymore. In addition that 2008 is right around the corner.

Patrick Bongo 4 years ago

Money disappeared for these investors to think about investing in properties, I guess they will have to sell their properties to cover for their losses in the stock market, properties prices will drop answering the offer and demand principal.

It is a good time for the residents of Dubai, bad time for stock brokers and Real Estate investors and brokers.

Paul King 4 years ago

This is just a gentle teaser of a correction that was denied by the 24/7 printing presses of global central banks. It's the right time to find a comfortable seat because this will get interesting.

Andre 4 years ago

And people still cannot see another more severe global financial crisis round the corner...

mani 4 years ago

Agenda of Saudis to keep the downward pressure on oil is self preservation of their oil market share longer term. At lower prices, the shale producers will find it difficult to sustain production and may be forced to shut shop or at least cut back.

SAM 4 years ago

@mani, true to some extent. The new reality is that OPEC in general and KSA in particular are helpless and in a lose-lose situation. If they cut production, other non-OPEC nations will increase production and fill in the gap, which means prices will still be dropping. Doing nothing is achieving the same thing. It appears that the drop in oil price is also due to less global demand and not simply over production. KSA will not deliberately support oil price reduction to score political points; it is simply a case of waking up too late and noticing that the party's over.