The Dubai FMG Index fell a whopping 5.99% on Sunday.
This is the biggest downward move since June 24, when the FMG Index fell 6.5%.
Once again, the catalyst for the sell-off appears to be Arabtec Holding Co, the biggest property developer in the UAE.
“Arabtec’s shares, which fell 9.9 per cent, the most since June 30, were halted from trading at the end of last week pending clarification of its ownership,” reported Bloomberg’s Sarmad Khan and Shoshanna Solomon. “Aabar is in talks to buy at least half of a 28.9 per cent stake held by the construction company’s former Chief Executive Officer Hasan Ismaik, a person with knowledge of the situation said July 15.”
Aabar released a statement today, which only stated that these talks were confidential. In other words, they offered no clarity.
Dubai has one of the hottest property markets in the world.
“Dubai has had a spectacular performance over the past two and a half years. Its latest performance was an amazing 31.57% annual house price rise during the past year to Q1 2014,” said Global Property Guide in June. “Property demand is surging and the economy remains strong.”
Some warn that Dubai’s property market is a full-blown bubble that is at risk of bursting. And trouble at the property developers could be an indicator of this.
“Chief Executive Officer Hasan Ismaik’s resignation in June and the subsequent dismissal of top managers threw into doubt an expansion plan that saw Arabtec shares quadruple during the CEO’s 15 months in charge,” reported Bloomberg’s Zainab Fattah. ” Concerns that the company was losing state support, followed by the CEO’s departure, caused Arabtec to drop by 59 per cent in Dubai trading from June 5 to June 30.”
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