Shares in Dubai construction firm drop 10% daily limit before closing 1.8% down but Dubai, Abu Dhabi markets both rise
Stock markets in the United Arab Emirates rebounded on Monday from a sharp drop in the previous session, although Dubai remained extremely volatile because of swings in construction firm Arabtec. Bourses in Qatar and Egypt retreated.
Dubai's index closed up 2.5 percent after dropping as much as 4.3 percent shortly after the opening, when shares in Arabtec plunged their 10 percent daily limit.
Arabtec eventually closed only 1.8 percent down, after again topping trading volumes in Dubai. It has been gyrating wildly on speculation that Aabar Investments, a key shareholder, may raise its 18.94 percent stake in the company.
In a brief statement on Sunday, Aabar disappointed investors by saying it was considering its options towards Arabtec but declining to elaborate. This triggered a fresh slide by the stock.
Arabtec said on Monday morning that its board would meet on Thursday afternoon to review its second-quarter earnings statement and other reports and recommendations, but it did not give any details, and there was no sign that the meeting would be other than routine.
Many retail investors initially took leveraged positions in Arabtec and have then had to sell other UAE stocks to meet margin calls on their positions. Even so, some fund managers are mystified - and appalled - at the way in which Arabtec, Dubai's sixth biggest company by market capitalisation, has come to set the tone for the Dubai market in recent weeks.
"I am not sure why this correlation has appeared between Arabtec and the whole market, which is illogical," said Ali Adou, portfolio manager at The National Investor in Abu Dhabi.
"There are strong fundamentals in the UAE and investors should not relate what's happening with a single company to the whole market."
Abu Dhabi's index, which fell as much as 2.0 percent earlier on Monday, also recovered and closed up 1.5 percent. Top real estate developer Aldar Properties ended 4.3 percent higher after sinking 8.3 percent in the morning.
Telecommunications operator Etisalat added 0.9 percent after reporting a 26 percent jump in second-quarter profit on Sunday. It made a net profit of AED2.5 billion ($681 million) in the three months to June 30, beating the AED2.19 billion average forecast of analysts polled by Reuters.
Qatar's bourse edged down 0.5 percent. Qatar Navigation (Milaha) was one of the main drags, dropping 4.4 percent.
The company posted a second-quarter profit of SR169 million ($46 million) on Monday morning, widely missing the forecast of QNB Financial Services, which had expected a profit of SR218 million.
Gulf International Services pulled back 1.7 percent after jumping 2.9 percent in the previous session on news that it had won a 1.2 billion riyal rig supply contract from Qatar Petroleum.
Al Khaliji Commercial Bank edged up 0.7 percent as it named chief operating officer Hesham Ezzdine as its acting group chief executive. It had slid 1.8 percent in the previous session after reporting a 5.9 percent decrease in second-quarter net profit.
Egypt's bourse pulled back 1.2 percent with most stocks in the red as market players cited a lack of positive catalysts and prospects for slower economic growth following austerity measures and an interest rate hike.
"People are indecisive at the current stage," said Chamel Fahmy, vice president for sales and trading at HC Securities and Investment in Cairo.
Egypt's central bank raised benchmark interest rates last Thursday in a surprise move seen as an attempt to hold down inflation after the government slashed subsidies on fuel and electricity.
Among other factors limiting investors' appetite is the fact that fresh financial aid from the Gulf has not been announced as quickly as investors had hoped, and "political risk from the region and specifically the Palestinian conflict", Fahmy said.
However, "we're not seeing aggressive selling pressure," he said, adding that strong second-quarter earnings could change the picture.