By Nikhil Lohade at the Wall Street Journal
DUBAI—Dubai stocks slumped on Tuesday, extending recent losses, as margin selling triggered a wider selloff amid growing ownership concerns at one of its main construction companies.
The emirate's stock market has been among the top risers globally since early 2013, buoyed by a rebounding economy on the back of strengthening trade and tourism and a sharp recovery in its property prices, which had crashed 50% in the wake of the global financial crisis.
Investor sentiment was further boosted by Dubai winning the rights late last year to host the World Expo in 2020, and the United Arab Emirates, of which it is a part, being promoted to emerging market status by index compiler MSCI in May.
But shares listed on the Dubai bourse have fallen sharply since hitting a multiyear high early last month.
The main DFM index finished 6.7% lower at 4,009.01 on Tuesday, after being down more than 8% intraday, and has now shed 25% in a little over six weeks. The market is till up 19% this year, after adding 108% last year.
"I think a correction was overdue. Valuations were already very overextended and let's not forget that historically markets tend to underperform in the 12 months subsequent to being upgraded by MSCI," said Fahd Iqbal, head of Middle East research for private banking at Credit Suisse. CSGN.VX in Your Value Your Change Short position
Not surprisingly, property stocks, which have led the Dubai market gains over the past year, topped the losers list as investors took profits off the table.
The selling on Tuesday, and this month, was exacerbated by margin calls, after Arabtec Holding, a heavyweight Dubai-based construction company, fell 9.8% to AED3.12, and has dropped more than 53% in June amid concerns about its ownership and business strategy.
"The sharp fall in [Arabtec] share price has triggered margin calls, which reportedly have created forced selling in other names also," Mr. Iqbal said.
Emaar Properties, the biggest name in Dubai's property sector and the developer behind the world's tallest building, was down 3.4% at AED8.50 on Tuesday. Union Properties, another Dubai developer, shed 10% to end at AED1.90.
Click here for rest of article
Write to Nikhil Lohade at [email protected]