DUBAI: Stock markets in Dubai and neighboring Abu Dhabi closed sharply lower on Monday, shedding 7.3 percent and 8.3 percent respectively, hit by a lack of buyers after Dubai World’s shock proposal to suspend debt payments.
Dubai’s benchmark DFM Index closed at 1,940.36 points, down 152.80 points from Wednesday, just before Dubai announced it wanted to freeze debt repayments by its huge Dubai World conglomerate for at least six months.
Leading securities, particularly in the construction and finance industries, plunged almost by the maximum-allowed limit of 10 percent after the bourse reopened following a four-day holiday.
The market in oil-rich Abu Dhabi dropped 8.31 percent to 2,668.23 points.
The Dubai and Abu Dhabi markets have shed around $10 billion of their market capitalization.
Trading almost froze in both markets, with heavy sell orders and almost no offers to buy.
The Dubai market registered only 37.5 million dirhams ($10.2 million) in turnover — around 10 percent of the average daily trade this year.
“This was expected because markets have panicked over exaggerated reports in the Western media,” Al-Fajr Securities analyst Hamam Al-Shamaa told AFP.
“We expect to see many foreign portfolios withdrawing from the market. Their exit obviously terrifies local investors,” he said, adding that the drop will continue on Tuesday.
“I do not expect investors to enter the market. Tomorrow (Tuesday) will most likely be a similar day,” he added, while pointing out that the markets go into another four-day holiday starting Wednesday.
But he expected local markets to bounce back when they reopen after the break. “I expect good news during the holiday,” he said.
In Dubai, the shares of giant property developer, Emaar, took a severe beating, shedding 9.86 percent. Dubai Islamic Bank lost 9.96 percent.
Other sectors were also affected, with the shares of the budget airline Air Arabia plunging by 9.62 percent.
Securities listed by port operator Dubai World unit DP World fell 14.88 percent on NasdaqDubai exchange and were the most active, according to NasdaqDubai website. Investors failed to draw reassurance from the UAE central bank’s announcement on Sunday that it was providing additional liquidity to banks in the United Arab Emirates.
“While we expect central bank to continue supporting the sector going forward, we believe the focus over the coming period will be on closely monitoring developments in the Dubai debt issue,” said economist Monica Malik from EFG-Hermes investment bank in statement Monday.
Dubai’s announcement sent shock waves around the world on Thursday and Friday as investors feared a possible default by Dubai and its state-owned businesses, which together owe an estimated $80 billion.
Dubai and Abu Dhabi were the only Gulf stock markets open on Monday. Kuwait follows on Tuesday and Saudi Arabia’s financial market, the largest Arab bourse in capitalization, will reopen next week.