Real estate woes hit DFM amid sharp drop in liquidity levels

DUBAI: An Emirati man talks on his mobile phone at the Dubai Financial Market in this Nov 30, 2009 file photo. —AP

DUBAI: Dubai stocks hit a 27-month low yesterday on the back of sharp falls in the real estate market and a drop in liquidity levels. The Dubai Financial Market Index ended the day's trading down 1.83 percent on 2,947.99 points breaching the 3,000-point psychological barrier.

The Dubai bourse, the most exposed to the global markets in the Gulf region, dropped 3.1 percent by the close of the Muslim trading week. The market has shed 12.5 percent since the start of the year as cash injections dropped sharply, with the main fall coming from the vital real estate sector.

"Dubai market has underperformed its (Gulf Cooperation Council) GCC markets losing over 12 percent (YTD) dragged by the sell-off in Real Estate sector,"

M R Raghu, head of research at Kuwait Financial Center (Markaz) said. Most of the seven Gulf bourses have made good gains in 2018 due to a partial recovery in oil prices, with Saudi stocks rising 12 percent. "Fundamentally, the real estate prices have been falling and the market has been sluggish," Raghu told AFP.

Dubai real estate witnessed a 46 percent fall in off-plan sales by value in the first quarter, and a 24 percent decline in previously owned resales, he said.

The real estate sector is one of the main pillars for Dubai's highly diversified economy, which is not dependent on oil. The index of the real estate sector on Dubai bourse has shed around 18 percent since the start of the year with property giant and market leader Emaar dropping 22 percent. Damac Properties, a leading real estate developer, was down 26 percent and troubled Drake and Scull International shed 50 percent since January 1. A massive fall in liquidity levels and reports that international investors, an important component in the market, have moved to Saudi Arabia, are other causes for the downturn, analysts said. According to local economic reports, liquidity levels dropped a massive 35 percent in April alone.

Boursa Kuwait

Meanwhile, Boursa Kuwait ended trading yesterday on mixed note with the premier market index up 13.46 points to reach 4,791.84 points. The main market index lost 15.1 points to stand at 4,815.54 points while all share market index rose by 3.3 points to stand at 4,800.65 points.

The value of trades was at KD 9 million with the volume reached 59.5 million shares done through 3,016 deals.

Meanwhile, world stocks made little progress yesterday as worries over global trade tensions weighed, while the US dollar consolidated recent bumper gains after the Federal Reserve reaffirmed the outlook for more rate hikes.

The MSCI world equity index, which tracks shares in 47 countries, traded flat in percentage terms. Europe's pan-European STOXX 600 index was down 0.1 percent as the euro held firm.

As the Fed policy meeting threw up no surprises with rates left unchanged, the focus shifted back to simmering trade tensions between the United States and China, as well as the ongoing first quarter earnings season.

In Europe, earnings disappointments from medical technology company Smith & Nephew and postal services provider Bpost soured the mood as the stocks fell 5.9 percent and 10.9 percent respectively, while German drug and crop chemicals maker Bayer flagged a stronger euro in its update.

E-Mini futures for the S&P 500 crept 0.3 percent higher, with overnight results from Kraft Heinz, Tesla and Spotify in focus. So far it has been a strong earnings season, with the year-on-year blended earnings growth estimate coming in at more than 25 percent in the first quarter for S&P 500 companies, according to Thomson Reuters I/B/E/S data, while the equivalent figure for the MSCI EMU index (European Economic and Monetary Union) is 14.6 percent in dollar terms.

The negative mood carried over from the Asian trading session, where shares slipped as hopes waned for real progress in Sino-US trade talks, following reports the Trump administration is considering executive action to restrict some Chinese companies' ability to sell telecoms equipment in the United States.

"The risk at the moment is that the increasing uncertainty could create ambiguity in executives' heads, it makes corporate decision-making more difficult and then (leads to) a decline in investment," Alastair George, chief investment strategist at Edison Investment Research, said.

Edison's George added that the impact from trade tensions was hypothetical at the moment, though.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, while South Koreanstocks stumbled 0.7 percent. Hong Kong's Hang Seng index ended 1.3 percent lower, but Chinese shares bucked the trend. The blue chip CSI 300 was up 0.8 percent, but not far from an eight-month low hit in April. - Agencies