(Adds context, analysis)
DUBAI, July 7 The financial market regulator of
the United Arab Emirates said it would tighten supervision of
the stock exchanges, after wild trading in Dubai-listed
construction firm Arabtec helped to trigger a market
Regulations on bank lending against shares will be reviewed
and amended if needed, the Securities and Commodities Authority
said in a statement on Monday after its chief executive met with
heads of the central bank, the economy ministry and the Dubai
and Abu Dhabi stock exchanges.
The SCA said it would also set up a technical committee with
the central bank and the exchanges to ensure the soundness and
integrity of share trading, and to prevent any manipulation of
The statements of corporate CEOs and securities analysts
will be monitored to make sure they're truthful, while the
committee will review sharp market movements and submit
recommendations, the SCA added without elaborating.
Shares in Arabtec, the Dubai market's most heavily traded
stock, more than tripled earlier this year to levels far above
fair value estimates by fund managers, then lost more than
two-thirds of their value as the bubble burst.
This helped to trigger a crash of the overall market as
investors scrambled to cover their losses on Arabtec; about $30
billion of market value was destroyed in eight weeks, although
the market has partly recovered in the last few days.
The violence of the rise and fall of Arabtec shares was
partly due to the fact that some buyers leveraged themselves
through bank loans or other means, traders said.
Bullish comments about Arabtec and its shares by then-chief
executive Hasan Ismaik, who resigned in June, helped to fuel
investor interest in the stock.
The SCA has not so far taken any action against Arabtec or
its executives over the swings in the stock; the regulator said
in a statement last week that it had taken all necessary steps
to ensure proper disclosure and good corporate governance by
The Arabtec debacle came at an awkward time for the UAE
because it had just been upgraded at the end of May to emerging
market status by international index compiler MSCI, a step which
drew more foreign portfolio investors to the country.
(Reporting by Andrew Torchia; Editing by Olzhas Auyezov)