The Dubai and Abu Dhabi benchmarks fell yesterday, led by real estate stocks, that had some of the biggest gains this year ahead of index compiler MSCI Inc.’s decision on its review of UAE’s and Qatar’s possible upgrade to emerging market from its current frontier status.
The Dubai Financial Market General index shed close to one per cent amid lower volumes. It fell 0.90 per cent to close at 2399.86 as value traded declined from Wednesday’s Dh895.69 million to Dh816.67 million.
The Abu Dhabi measure was down 0.25 per cent to 3590.43.
“We expect market volatility due to the strong rally since the beginning of the year,” said Tariq Qaqish, head of asset management at Al Mal capital, an investment bank based in Dubai. “And the second element is the wait and watch scenario of the MSCI.”
Both UAE and Qatar have been repeatedly overlooked for an upgrade since 2009. If the UAE manages to get itself upgraded, Qaqish believes there is a potential upside during the summer but not as investors expect.
“So we will see stability rather than a big rally,” he said, adding that if the UAE doesn’t make it, the market will see a correction. But “at the same time [that] will be an opportunity for investors, especially institutions, to re-enter [the market].” Analysts believe the UAE has a better chance than Qatar, having passed the liquidity test and also, they have no issue with foreign ownership limits. The only obstacle was the DVP (delivery versus payment) process, more specifically, the issue of forced selling within the process.
“The Abu Dhabi and Dubai exchanges have managed to solve that last month,” Qaqish said.
Heavyweight Emaar Properties slipped 1.04 per cent to Dh5.73 even after it announced a joint venture with Dubai Holding to build a 6.5 million square metre “urban district” called the Dubai Creek Harbor.
Drake and Scull International was down 2.91 per cent to Dh1. Construction major Arabtec fell 5.07 per cent to Dh2.06 after it launched $650 million right issue on Sunday.
“For Arabtec, it is purely investors selling before they are committed to the new rights,” said Qaqish. “They are freeing up liquidity to subscribe.”
In Abu Dhabi, Aldar Properties and Sorouh Real Estate, the top two stocks with the highest turnover, declined 0.45 per cent to Dh2.22 and 0.37 per cent to Dh2.71 respectively.
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