Abu Dhabi and Dubai feel global pinch as investors take flight from falling oil prices, potential Korean conflict and financial contagion in the euro zone.
World markets plunge in triple blow
ABU DHABI // UAE stock markets joined a worldwide plunge yesterday, fuelled by a triple blow of sliding oil prices, tension on the Korean peninsula and more troubles in Europe. The main Dubai index lost 4.6 per cent on a third consecutive day of decline and Abu Dhabi's benchmark fell 3.1 per cent. It was the largest percentage loss for the Abu Dhabi bourse since December, after the Dubai World debt standstill.
Khaled Abdulrazzak, who trades on the floor of the Abu Dhabi Securities Exchange (ADX), said: "No one expected this and now people are fearing the worst.". Oil fell as low as $67.64 a barrel at one point yesterday. It is down about 20 per cent for the past three weeks, threatening the profits of many Gulf companies and regional government revenues. Markets in New York and London fell below psychologically significant levels, with the Dow Jones under 10,000 and the FTSE below 5,000.
There were also major losses in Asian markets, where jitters mounted over the dispute between North and South Korea. A South Korean news agency reported that the North Korean leader, Kim Jong-il, had ordered his military to be prepared for combat. In Europe, contagion fears spread from Greece to Spain, where the central bank was forced to spend US$700 million (Dh2.57 billion) to bail out a savings bank that had huge property losses.
In local markets, the renewed forecast from the IMF that Dubai's economy would shrink about 0.5 per cent this year added to the gloom. Adel Merheb, the technical analyst at Shuaa Capital, said: "The equity market is in bad shape at the moment. Our markets have been experiencing some selling sentiment but now it is at a much faster pace." All GCC share markets are in the red for the year. The Dubai Financial Market General Index is down 12.9 per cent and the ADX General Index is down 3.4 per cent.
Fadi al Said, the senior fund manager and head of equities at ING Investment Management in Dubai, said: "The market has been in capitulation mode." @Email:firstname.lastname@example.org email@example.com * With additional reporting by Tom Arnold