Dubai, Nov 12: Dubai city for the first time witnessed fear of financial meltdown on Tuesday, Nov 11 after the steep fall in realty stocks, the stalling of real estate sales, sacking of 200 employees by a leading developer and tightening of credits by banks. Also the fear was openly voiced over a business meltdown due to the global economic crisis.
On Tuesday, the Gulf News reported that the Dubai stock market plummeted more than seven per cent on Tuesday, Nov 11 as investors, gripped by worries of a real estate crash and a grim regional and global economic outlook, continued to be on a selling spree. Many Indian developers like Shobha, stars like Shah Rukh Khan and expatriate businessmen have announced investments in the UAE and any likely meltdown will hit their business as well as job prospects of thousands of Indians and other expatriates.
It has been carnage in Dubai stock exchanges in the last few days as the worth of top government-owned real estate companies like Emaar, which had planned huge developments in India with a Calcutta-based real estate firm, continued rapid downward slide, declining 9.88 per cent to close at 3.74 Dirhams.
"Dubai is bearing the brunt of the regional and global market weakness... The market perception is that Dubai is seen as the 'weakest link' within the GCC in this environment," said Khalid Masri, executive partner, Rasmala Investments. The combined loss of market capitalisation since last Sunday is about 65 billion Dirhams.
Vyas Jayabhanu, head of Abu Dhabi-based Al Dhafra Brokerage said a series of news yesterday created havoc. "Investors didn't take kindly to the news that real estate major Damac has laid off 200 employees. And then there was another big one that Emirates airlines profits dived by 88 per cent...Hence, investors, who came in today, did not believe Emaar chairman Mohammad Al Abbar's statement that UAE's GDP will contract from 14 per cent to nine per cent. They certainly feel it is going to be worse," he added.
In the last two months, expatriates, including a majority of Indians had sent home four billion Dirhams taking advantage of low rupee exchange value. Most of the funds were raised through easy personal loans from banks and any large scale layoffs will mean losses to banks.
Elsewhere in the region, a similar gloom pervades investors. Saudi Arabia's Tadawul Index closed 5.2 per cent down and Kuwait's stock exchange, the second largest in the Arab world, dropped 2.6 per cent. Qatar and Bahrain stock exchanges declined 6.25 per cent and 2.74 per cent, respectively.
On Tuesday, Nov 11 leading UAE bank Mashreq announced that it was open to merger. Meanwhile, a top banker from cash rich Abu Dhabi, the CEO of Abu Dhabi Commercial Bank Ervin Enox said his bank will not allow defaults from Dubai-owned government companies on credit payments.