As mounting concern about the United States reducing fiscal stimulus continued to spur a selloff in most emerging markets, Dubai’s benchmark stock index dropped the most in more than a year.
Property developer Emaar Properties led the nosedive by dropping to its lowest in two months as the Dubai Financial Market, the region’s only publicly traded stock market, plunged 6.3 per cent.
The DFM General Index retreated 2.6 per cent, the most since March 2012, to 2,299.78 points at the close in Dubai. Abu Dhabi’s ADX General Index lost 1.9 per cent, the most since December 11. Egypt’s EGX 30 fell 2.2 per cent to the lowest in a year. The steep fall was also prompted by less positive investor sentiment in the wake of a lull summer season coinciding with the advent of the holy month of Ramadan when businesses record slower activities.
Analysts pointed out that majority of investors and traders would like to remain on the sidelines until after the end of Ramadan. Emaar, which has the heaviest weighting on Dubai’s index, has surged 44 per cent this year, while the benchmark has jumped 42 per cent. It lost 2.7 per cent to Dh5.39, the lowest since April 23.
The DFM retreated to Dh1.79.Saudi Arabia’s Tadawul All Share Index gained 0.5 per cent. The kingdom will change its weekend for government ministries and monetary agencies to Friday and Saturday from June 29, the official Saudi Press Agency reported.
The weekend is currently Thursday and Friday. The Bloomberg GCC 200 Index of the biggest companies in the GCC decreased 0.1 per cent. Oman’s MSM30 Index advanced 0.3 per cent, while Kuwait and Bahrain rose 0.1 per cent.
Qatar’s QE Index retreated 0.2 per cent. Emerging market stocks last week tumbled 5.6 per cent, the most in 13 months, as Federal Reserve Chairmen Ben S. Bernanke said on June 19 that the US might halt bond purchases by mid2014. China’s manufacturing is shrinking at a faster pace this month, adding to stresses in the economy and financial system after interbank borrowing costs surged. Most emerging market currencies fell heavily with the Russian rouble and South African rand down more than one per cent to the dollar while earlier in Asia central banks in India and South Korea intervened to stem currency losses.
The MSCI Emerging Markets Index, which represents the largest emerging markets such as Brazil and China, is down more than 12 per cent this year, as of Thursday’s close. But the MSCI Frontier Markets 100 Index, which includes smaller markets such as Kuwait, Qatar and Nigeria, is ahead by more than 13 per cent.
The divergence shows frontier markets might be a good place to park some money if stocks’ slide continues, some advisers say, though investors should be careful to ensure they don’t end up in funds that are overly concentrated in certain countries.