DUBAI: Bourses in the UAE suffered their biggest losses in many months on Tuesday as a slide in construction firm Arabtec, Dubai’s most heavily traded stock, triggered a chain of margin calls that forced a broad sell-off.

Dubai’s benchmark closed down 6.7 percent, its biggest daily loss since last August, after tumbling as much as 8.7 percent at one stage. At least 10 stocks fell their 10 percent daily limits.

Abu Dhabi’s bourse sank 3.4 percent, its biggest drop since January 2011, with eight stocks limit-down.

Traders said the plunge was not due to any fundamental economic concerns, or to geopolitical tensions related to Iraq. Instead, the market was vulnerable to heavy selling after retail buyers sent it soaring earlier this year.

Arabtec was a catalyst for Tuesday’s sell-off as the stock was the first to go limit-down after the company said it had laid off some staff. The announcement followed a move by major shareholder Aabar Investments to reduce its stake in Arabtec earlier this month, and the resignation of the company’s chief executive Hasan Ismaik last week.

Tuesday’s drop extended the stock’s loss this month to 53 percent. This triggered margin calls for leveraged retail investors and since there were no buy orders for Arabtec even at limit-down levels, investors were forced to meet the calls by selling other shares.

“The brokers, I believe, had to go to other shares and sell,” said Fouad Darwish, head of brokerage services at Global Investment House in Kuwait. That in turn triggered more margin calls and further selling, which also affected Abu Dhabi as some UAE investors trade on both exchanges.

“This is reactive selling and in our business reactive selling is disastrous, because stocks move at prices which may have nothing to do with their fundamentals.”

Dubai’s index has now tumbled 26 percent from a multi-year peak hit in mid-May, erasing roughly $30 billion of value.

The index is still up 19 percent year-to-date, and Arabtec shares are still up 52 percent. But the Arabtec saga has exposed major risks in the Dubai market, which along with Abu Dhabi and Qatar was upgraded to emerging market status by index compiler MSCI last month.

The bourse remains dominated by volatile retail investors, while many fund managers feel a lack of prompt corporate information disclosure contributed to the turmoil.

Aabar has not clarified its intentions toward Arabtec since Ismaik’s resignation, and the fate of his 28.85 percent stake in the company is unclear, though Ismaik told Reuters on Tuesday that he had received three offers for the stake. He did not name the parties which made the offers.

Other markets in the region saw little if any direct impact from Dubai, but it did affect general sentiment, in addition to concerns over the heavy fighting in Iraq and a seasonal exodus of retail investors ahead of Ramadan.

Egypt was the worst performer in the region after the UAE bourses, sliding 1.7 percent. Unlike the Gulf nations, its trade balance and state budget could suffer from any sustained increase in oil prices due to the Iraqi conflict.

ìI believe that the current weakness is attributed to multiple factors including the beginning of Ramadan and the spillover of the sell-off seen in Dubai,” said Harshjit Oza, assistant director of research at Naeem Brokerage in Cairo. “But I believe that the downside has been limited by factors such as MSCI keeping Egyptís emerging market status alive.”

Iraq has not emerged as a major worry for the Gulf markets. One-year dollar/Saudi riyal forward SAR1Y=, used as a proxy by hedge funds to trade the region, jumped on Monday to their highest level since the Arab Spring uprisings in March 2011. But they fell back to more normal levels on Tuesday.