MIDEAST STOCKS-Gulf markets sink as Arabtec pushes Dubai into bear market territory

Mon Jun 23, 2014 10:16am EDT

* Arabtec remains in freefall after news of layoffs

* Collapse of its share price unnerves investors across Gulf

* Iraq and approach of Ramadan also weigh on markets

* Saudi Arabia's SAFCO falls after delaying plant start

* Oman bucks the trend as power firms surge on twin listing

By Olzhas Auyezov

DUBAI, June 23 (Reuters) - Uncertainty over the fate of Dubai's most heavily traded stock, construction firm Arabtec , as well as the fighting in Iraq and the approach of the Ramadan lull depressed most share markets across the Gulf on Monday.

Arabtec has laid off a significant number of employees in the wake of chief executive Hasan Ismaik's departure last week, sources with knowledge of the matter told Reuters on Monday. Arabtec declined to comment.

The stock plunged its daily limit of 10 percent for a second session in a row, taking its loss this month to 48 percent. Dubai's index tumbled 4.3 percent to a three-month closing low of 4,296 points, leaving it down 21 percent from May's multi-year peak - meaning, by some definitions, that it has entered bear market territory.

Arabtec shares are still up 69 percent year-to-date and the Dubai index remains up 27 percent. But the lack of clarity surrounding Arabtec - major shareholder Aabar has declined to comment on its intentions, although large layoffs could presumably hinder Arabtec's ambitious expansion plans - is damaging. The sudden downturn in the fortunes of a high-flying stock has hurt confidence in the Dubai market and, to some extent, in other Gulf markets.

"I think that the main reason for this is the ambiguity around Arabtec, which is affecting the sentiment on the market and causing some panic selling across the board," said Marwan Shurrab, fund manager and head of trading at Vision Investments.

Arabtec's decline may have been amplified by margin calls forcing leveraged investors to sell stocks at certain levels.

Shares in heavyweight Emaar Properties fell 4.9 percent, bourse operator Dubai Financial Market dropped 9.1 percent and conglomerate Dubai Investments was down 5.2 percent.

One of just a handful of Dubai stocks that rose was Kuwait-based Al Madina for Finance and Investment Co, which gained 4.0 percent after it announced a deal to settle a 10 million Kuwaiti dinar ($35.7 million) debt to Boubyan Bank with a transfer of equity. The firm's Kuwait-listed shares rose 7.0 percent, far outperforming the Kuwaiti market, which slid 0.7 percent.

REGION-WIDE IMPACT

Abu Dhabi's index fell 2.0 percent. Aldar Properties , which has awarded some contracts to Arabtec, such as a $1.1 billion deal for a project in Kazakhstan last year, was the main drag, tumbling 7.0 percent.

Saudi Arabia's main index slid 1.1 percent, dragged down by blue chips such as Al Rajhi Bank and property developer Jabal Omar, down 1.5 and 2.7 percent respectively.

"I think the (Saudi) market needs a breather and I think Dubai is driving everyone down," said Farooq Waheed, senior portfolio manager at Riyad Capital, adding that the fighting in Iraq also remained a negative factor, although there is no sign so far of it destabilising the wealthy Gulf economies.

Shares in Saudi Arabian Fertiliser Co fell 1.7 percent after the firm delayed the start of commercial operations at its SAFCO-5 plant until the first quarter of next year and announced a reduced dividend for the first half of 2014.

Oman's bourse was the only gainer in the region on Monday, up 0.3 percent as power companies Al Suwadi Power Co and Al Batinah Power Co surged 25 and 26 percent respectively on their debuts after heavily oversubscribed initial public offers. Both stocks closed at 0.163 rial, around the top of analysts' fair value estimates.

MONDAY'S HIGHLIGHTS

DUBAI

* The index tumbled 4.3 percent to 4,296 points.

ABU DHABI

* The index slid 2.0 percent to 4,710 points.

QATAR

* The index slipped 0.2 percent to 12,436 points.

SAUDI ARABIA

* The index pulled back 1.1 percent to 9,554 points.

KUWAIT

* The index fell 0.7 percent to 6,973 points.

EGYPT

* The index slipped 0.1 percent to 8,305 points.

BAHRAIN

* The index edged down 0.2 percent to 1,428 points.

OMAN

* The index rose 0.3 percent to 6,935 points. (Editing by Andrew Torchia)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.