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Dubai drops as Arabtec concerns linger; FTSE Qatar impact fades

DUBAI: Uncertainty about the future of Dubai contractor Arabtec Holding put local investors in a bearish mood Sunday, affecting the whole market, which ended a three-day gaining streak. Most Gulf markets moved little on declining volumes.Shares in Arabtec tumbled 9.9 percent after failing to hold onto early-session gains and were among the main drags on the Dubai benchmark, which fell 2.3 percent after going up as much as 1 percent shortly after the opening.

Arabtec shares have plunged 43 percent this month after one of its main shareholders, Abu Dhabi state fund Aabar Investments, reduced its stake in the firm to 18.94 percent from 21.57 percent.

The shares became more stable after Arabtec chief executive Hasan Ismaik resigned last week and an Aabar-linked executive became acting CEO, but analysts say investors are still waiting for a clear message from the fund on its strategy.

“There is a feeling that the news on Arabtec last week wasn’t the final episode,” said Sanyalak Manibhandu, manager of research at NBAD Securities in Abu Dhabi.

“A lot investors expect to see more newsflow from the company. And until the uncertainty around Arabtec is resolved, it might have a negative impact of on the rest of DFM [ Dubai bourse].”

Property and construction stocks, which dominate the emirate’s stock market, were down Sunday. Emaar Properties fell 3.4 percent, Deyaar Development slid 2.5 percent and Union Properties fell 1.3 percent.

Shares in construction firm Drake and Scull, which surged last week on news that it would issue a convertible bond to a strategic investor, also retreated after touching an all-time high of 1.97 dirhams. They slid 3.2 percent to 1.84 dirhams.

Abu Dhabi’s bourse closed flat on a mixed performance by blue chips in low volume. National Bank of Abu Dhabi and Aldar Properties fell 1.7 and 2 percent respectively, while First Gulf Bank rose 1.6 percent and Abu Dhabi Commercial Bank added 1.5 percent.

The holy month of Ramadan, which is traditionally a period of lower market activity, will begin next week, and this may already be affecting bourses across the region.

“We always expect traded value to go down just ahead of Ramadan,” Manibhandu said. “But this year, Ramadan falls during second-quarter earnings announcements, so trading could pick up. People do trade during Ramadan if there is something to trade on.”

Heavy fighting in Iraq is another factor deterring some investors from opening new positions. Shares in Abu Dhabi National Energy Company and Dana Gas, both of which have operations in Iraq’s Kurdistan region, fell 0.9 and 1.3 percent. They have so far not announced any damage to those operations.

Mobile phone operator Zain Kuwait, which is also heavily exposed to Iraq, slipped 1.6 percent, limiting the blue-chip benchmark index’s rise to 0.3 percent. The wider index, however, added 1.2 percent as small-caps continued to recover from last week’s slump.

Qatar’s index gained 0.05 percent as Qatar National Bank and Industries Qatar partly recovered from short-term weakness caused by changes in the FTSE frontier market index last week. Shares in QNB and Industries Qatar added 1.1 percent and 0.4 percent respectively.

In a June 20 review, FTSE removed seven stocks with a combined market capitalization of $8.2 billion from the index and replaced them with seven stocks that have a combined capitalization of $28 billion, reducing the weightings of other components, including the Qatari stocks.

Before the reshuffle, the index had a total capitalization of $66.7 billion, implying constituents that remained in the index had their weightings reduced by about a quarter. But since very large amounts of money are not benchmarked to the FTSE frontier market index, the impact on fund flows was not large.

Shares in Egypt’s Beltone Financial Holding slid 3.5 percent, as the offer period started for the 20 percent stake in EFG Hermes, which a consortium including Beltone and Egyptian billionaire tycoon Naguib Sawiris seeks to buy.

The offer to buy EFG Hermes shares at 16 pounds will run until July 3, according to an EFG statement sent to the bourse. EFG Hermes was flat at 15.35 pounds, while the Cairo index slipped 0.3 percent.

Saudi Arabia’s Almarai edged down 0.2 percent after the Gulf’s biggest dairy company said it would invest, together with U.S. soft drinks giant PepsiCo, at least $345 million in Egypt over the next five years.

The stock underperformed the Saudi index, which rose 0.1 percent.

 
A version of this article appeared in the print edition of The Daily Star on June 23, 2014, on page 5.
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Summary

Uncertainty about the future of Dubai contractor Arabtec Holding put local investors in a bearish mood Sunday, affecting the whole market, which ended a three-day gaining streak.

Arabtec shares have plunged 43 percent this month after one of its main shareholders, Abu Dhabi state fund Aabar Investments, reduced its stake in the firm to 18.94 percent from 21.57 percent.

Emaar Properties fell 3.4 percent, Deyaar Development slid 2.5 percent and Union Properties fell 1.3 percent.

National Bank of Abu Dhabi and Aldar Properties fell 1.7 and 2 percent respectively, while First Gulf Bank rose 1.6 percent and Abu Dhabi Commercial Bank added 1.5 percent.

Qatar's index gained 0.05 percent as Qatar National Bank and Industries Qatar partly recovered from short-term weakness caused by changes in the FTSE frontier market index last week. Shares in QNB and Industries Qatar added 1.1 percent and 0.4 percent respectively.

The stock underperformed the Saudi index, which rose 0.1 percent.


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