Arab Stocks Drop on Real Estate Concern; Emaar, Arabtec Retreat

By Haris Anwar and Michael Patterson

Jan. 21 (Bloomberg) -- Arab stocks fell, sending the Dubai index to the lowest close since June 2004, as a report showing the emirate’s real-estate slump deepened last month heightened concern the region’s economy will contract.

Emaar Properties PJSC, Aldar Properties PJSC and Arabtec Holding Co. fell more than 9 percent after HSBC Holdings Plc said Dubai real-estate prices dropped 23 percent from a September peak. Emirates NBD PJSC, the United Arab Emirates’ biggest bank, lost 5 percent. Egyptian stocks also declined.

“We’re seeing a sharp slowdown in real-estate activity, and that is the main pillar of growth in this region,” said Chamel Fahmy, senior regional sales trader at Beltone Securities Brokerage in Dubai. “The long-term foreign and institutional investors are gloomy on the profit and economic outlook.”

Gulf shares lost more than half their value since July as the global credit freeze halted a fourfold surge in Dubai home prices at the same time as a 70 percent drop in oil eroded export revenue. Amlak Finance PJSC and Tamweel PJSC, Dubai’s two-largest mortgage lenders, were taken over by a U.A.E. government-owned bank last year after the financial crisis squeezed their access to credit.

The Dubai Financial Market General Index tumbled 5.5 percent to 1,462.11. The Abu Dhabi Securities Exchange General Index lost 5.1 percent, while Kuwait’s index weakened 1.4 percent.

World’s Biggest Drop

Foreign direct investment in developing nations will drop by $180 billion, or 31 percent, this year as a global recession prompts multinationals to cut spending on factories and mines, according to the World Bank.

Qatar’s DSM 20 Index lost 8.3 percent, Oman’s Muscat Securities Market Index tumbled 6.3 percent and Egypt’s CASE 30 Index slumped 6 percent, for the steepest declines among 89 stock indexes tracked by Bloomberg globally. The Bahrain All Share Index dropped 1.7 percent.

Emaar, the U.A.E.’s biggest publicly traded real-estate developer, declined 9.8 percent to 1.85 dirhams as HSBC cut the builder’s share-price estimate by 39 percent. Aldar retreated 9.6 percent to 2.63 dirhams, the lowest close since listing in April 2005. Arabtec, the construction company building the world’s tallest tower in Dubai, fell 9.5 percent to 1.14 dirhams.

Dubai property prices dropped after banks cut lending and sellers offered discounts as a result of the global economic slowdown, HSBC said.

Egyptian Decline

“The discount of agreed to advertised prices has deepened, indicating market distress,” the bank’s analysts including Majed Azzam and David Lepper wrote in the report. “Early 2009 data suggests further weakness.” Property prices in December rose 19 percent compared with the year-earlier period, the note said.

Saudi Telecom Co. slumped 10 percent to 45.9 riyals after the Arab world’s largest phone company said fourth-quarter profit declined 62 percent on currency losses. Saudi Arabia’s Tadawul All Share Index rose 0.3 percent.

National Bank of Bahrain, the oldest lender in the country, dropped 9.1 percent, the most in a month, to 0.6 dinar after it said full-year profit declined a record 17 percent as a result of the global financial crisis.

Bassim Arida, the director of international sales at Cairo Capital Securities in Cairo, said Egypt’s market decline was exacerbated by overseas investors pulling their money out of the region.

“The selloff has been triggered by redemptions from investors abroad that started in mid-January because of the global financial crisis,” Arida said. The CASE 30 Index has lost 20 percent in the past 11 days.

-- Editors: Claudia Maedler, Ralph Johnston.

To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net