DUBAI, 25 December 2005 — UAE shares fell to their lowest levels in more than four months yesterday as a sharp correction forced heavily leveraged retail investors into panic selling.
Dubai’s benchmark index, which has fallen steadily since hitting a record high on Nov. 9, sank 5.33 percent to end at 950.26 points, its lowest close since Aug 16, according to Reuters data. The Abu Dhabi index finished 2.7 percent down at 4,849.83 points, its lowest since Aug 15.
“What we are witnessing now is panic selling from small investors in particular and most of this category depends on credit-financing...” said Wadah Al-Taha of the National Bank of Abu Dhabi.
Brokers said small investors had borrowed to ride a long rally in share prices which saw both indices hitting record highs this year. But with a correction setting in many retailers were running out of time and money to pay back their loans. “(They are under) time pressure...and price pressure. This double pressure will make them lose control of the selling. This is (having) a psychological impact,” Taha said.
Volumes were moderate on both markets. In Dubai more than 85.9 million shares changed hands while 66.9 million shares were traded in Abu Dhabi. “These are not institutional volumes. The big players and even retailers who have invested their own money are still holding on but they may be forced to start piggy-backing the decline,” said one fund manager.
