Global panic hits local markets

Dubai: UAE shares sank for the fifth consecutive day on Tuesday as panic selling led by foreign investors drove local shares down.

The selloff triggered by US recession fears saw the Dubai Financial Market Index plunging 6.2 per cent to finish at 5,210.58, while the Abu Dhabi Securities Market shed 6.8 per cent to close at 4,302.46.

Both bourses together shed another Dh50.7 billion in market capitalisation yesterday, bringing the cumulative losses for the last five trading sessions to Dh132 billion.

On DFM, the most liquid stocks such as Emaar, Air Arabia and Dubai Financial Market nosedived while leading ADSM-listed shares such as Mazaya Holdings, Aldar, Aramex and Dana Gas reported losses of 9 to 14 per cent.

"The global link to the market crash is obvious. We are not an isolated market anymore. The market correction today proves the increasing correlation between the region and international markets," said Shaikh Sultan Bin Saud Al Qasimi, Chairman of Barjeel Geojit Securities.

The panic selling brought down all seven markets in the Gulf yesterday and wiped out most of the recovery they made after a region-wide crash in 2005.

Tuesday's slide was led by the Saudi stock market, the largest in the Arab world, with the Tadawul All-Share Index shedding 9.7 per cent to finish at 9,338.54.

Markets in Doha and Muscat also slipped but the Kuwait and Bahrain stock markets suffered only slight declines.

The sudden exit of foreign investors has been largely driven by the fear that the liquidity crunch in the US is escalating into a recession.

Ample liquidity

US stocks tumbled at the open yesterday, but climbed back from the early plunge at mid-day. Though stocks regained ground as investors digested the Fed's move to cut its benchmark rate and as bargain-hunters entered the market, trading remained volatile.

In midday trading, the Dow was down 0.31 per cent, at 12,061.26, recouping from its earlier opening at 11,657.58.

European shares meanwhile jumped nearly two per cent, led by financial stocks, after the US rate cut turned widespread losses into gains. The pan-European FTSEurofirst 300 index ended 1.9 per cent higher at 1,304.37, snapping a five-day losing run.

Despite the exit of foreign investors, some analysts say Gulf stocks will recover, as the region has ample liquidity and historically low correlation to the US market.

"The bleak prospect of the US economy has taken its toll on all the global markets ... but there is enough liquidity in the region for the markets to rebound," said Rami Sidani, senior associate partner at Shuaa Capital.