ALDAR printed a 52 WK low on 12NOV2008 (4.00), a level last seen in MAR2007.
If the new 52 WK low holds then upside targets in case a real bear market rally materializes are
7.00 – 7.18
7.69 FIBO LEVEL
8.83 – 8.95 FIBO LEVEL
9.11 – 10.00 can be reached
Extended trade below the recent support of 4.00, the all-time low of 3.42 on X-MAS DAY 2006 beckons and negates the levels mentioned above.
An article (17NOV2008) from alaswaq.net (Arabic) points out that weaker trading volumes and the reduced number of trades threaten the survival of most UAE brokerage houses, which have already lost big chunks of capital because of wrong market bets on rising share values.
The article quotes Mr. Murtada Al Dandashi, CEO of Al Ramz Securities, as saying he expects 70 brokerage companies to exit the market after having lost 80% of their paid-up capital that they had used to speculate on the UAE stock markets and to secure bank credit lines to purchase even more shares. The recent plunge in the UAE stock markets since September has wiped out the value of brokers’ leveraged positions.
Dandashi expected the biggest 20 brokerage houses to survive intact. He expected another 20 brokers to go through a consolidation phase as they looked to strengthen balance sheets, solve liquidity problems, and to abide by the financial requirements set by ESCA.
The article also notes that “experts” have demanded that authorities monitor brokerage houses more closely to protect market participants, presumably retail accounts.
Dandashi is also quoted as demanding ”liquidity get pumped into brokerage companies to keep the problem from worsening.”
Essentially, most of the 100-something UAE brokerage companies have risked their capital speculating on UAE stocks that have plunged this year, and crashed since October. These companies were also leveraged, so it’s likely the banks’ margin calls have wiped out most of the UAE stock markets’ value in October and November.
What’s interesting is that ADX and DFM brokerage companies require the stock exchanges’ approval to do their own proprietary trading, as per ESCA rules and regulations.
The UAE’s stock markets and stock brokers are regulated by the Emirates Securities and Commodities Authority (ESCA).
If it’s in Arabic, click here (English).
ESCA regulates three of the five financial exchanges in the UAE
1. Abu Dhabi Securities Exchange (ADX)
2. Dubai Financial Market (DFM)
3. Dubai Gold and Commodities Exchange (DGCX)
photo by Charles Crowell-Bloomberg News
Photo taken on 6th October, 2008 at the World Trade Centre, Dubai.
Categories: IMAGES · STOCKS
Tagged: crash, dfm, losses, MARKETS, shock
There’s quite a few basic facts and expert opinions that the following Bloomberg article offers on the economic situation in the Gulf.
Nouriel Roubini is expecting a “bust” in Dubai specifically.
The major worry now for Abu Dhabi and Saudi in particular is (and should be) the price of oil falling below USD 60 per barrel.
(My emphasis in bold in the article. Please note that the links in the Bloomberg article are the authors’ own, not mine.)
Gulf Citizens Beg for Bailout as Stock Rout Signals End of Boom
By Glen Carey and Matthew Brown
Oct. 31 (Bloomberg) — Abdullah Hajeri led a march on the Emir’s palace in Kuwait this week, demanding the oil-rich nation’s ruler stop stocks from plunging. Adnan Mohammed Saleh, down the Persian Gulf coast in Dubai, said he wants more government protection from the global financial crisis.
“Every day the market is crashing,” said Saleh, a 42-year- old trader, staring dumbfounded last Tuesday as company names scrolled across the Dubai Stock Exchange’s outdoor ticker in red.
The region’s rulers are under pressure from citizens to shore up investors, not just banks, as they try to fend off what may be the worst economic crisis since December 1998, when oil at $10.35 a barrel forced them to slash spending. Crude prices have fallen 50 percent from a record $147.27 in July, and stock indexes in Dubai and Saudi Arabia are down by as much this year.
Gulf economies are more susceptible to financial turmoil than in the past because of their greater dependency on international expertise, investment and tourists to diversify away from oil. While Dubai, home to the world’s tallest building and the man-made Palm Island, is considered most at risk, no part of the Persian Gulf will go untouched.
“There is no way you can say that any trouble in Dubai is going to be isolated,” Georges Makhoul, Morgan Stanley’s president for the Middle East and North Africa, said in an interview in London. “The biggest threat is going to be local confidence in the local economy, whether it’s in Dubai or Abu Dhabi or anywhere else.”
No Investors Left
There aren’t many international investors left in the region, he added.
Regional competition to attract investors and tourists from around the world led to a surge in record-breaking projects.
Dubai is racing against Saudi billionaire Prince Alwaleed bin Talal’s investment company to build the world’s first kilometer-tall tower. Saudi Arabia has turned a spot on its Red Sea coast into the biggest property development in the Middle East. Now little more than sand and construction cranes, the $120 billion King Abdullah Economic City is meant to create 1 million jobs and be home to 2 million residents.
Projects risk going unfinished or becoming white elephants if economies around the world go into recession, keeping international investors and tourists closer to home.
Dubai’s plans, including the Disneyland-style “Dubailand” that will be three times the size of Manhattan, are predicated on doubling the number of tourists annually to reach 15 million visitors by 2015.
“Many of the projects being marketed in the Gulf today will get shelved,” Kamel Lazaar, chairman of Riyadh-based financial advisory firm Swicorp, said Oct. 7. ``The price of land has been inflated. It will have to correct.”
`Better Suited’
Kuwait on Wednesday became the third Gulf state to prop up its banking system. It did so after losses on currency derivatives at Gulf Bank KSC, the country’s second-largest lender by assets, sparked a surge in customer withdrawals from the bank.
The United Arab Emirates said Oct. 12 it would guarantee deposits of all local lenders and large foreign banks. It also set up a $19 billion facility to help banks make loans. Saudi Arabia, the world’s largest oil exporter, put $2.7 billion into a government-run bank in Riyadh to provide no-fee loans to low- income citizens.
“We are going to be impacted, but we are better suited than anyone else to deal with the problems,” Hareb Al-Darmaki, executive director of the Abu Dhabi Investment Authority, said Oct. 28 at a London conference for companies from the United Arab Emirates’ richest member. “We have the ammunition.”
Societal Setback
The emirate has almost 8 percent of the world’s oil reserves and a sovereign wealth fund with assets between $250 billion and $875 billion, according to a range of estimates compiled by the International Monetary Fund. Even with its decline, oil still averages $110 a barrel for the year.
Residents of the region are used to government intervention. All Gulf countries are run by unelected rulers who maintain political power through tribal allegiances and marriages. Generous state welfare programs have traditionally damped demands for more political participation.
How the region’s rulers cope with the turmoil may define relations with their people in the future, as they try to wean their subjects off state handouts and encourage them to find jobs and embrace market capitalism.
“There’s no question that it sets back the move from socialist, paternalistic societies toward more modern capitalist states,” said Gabriel Stein, a director at London’s Lombard Street Research, which provides economic analysis to investors and companies. “It is a trend that we have seen all over the world. The immediate reaction is that you told us to do this, so now things are going wrong it’s up to you to help us out.”
Market `Destruction’
On Oct. 27, Hajeri, an independent equity trader, and 20 peers marched from the Kuwait Stock Exchange’s trading floor to the emir’s office to demand that the government close the exchange. Rebuffed, Hajeri said it meant “destruction to the market and the Kuwait people.”
All capital markets in the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, have declined and interest rates have increased since Lehman Brothers Holdings Inc. sought bankruptcy protection on Sept. 15.
Foreign investors were net sellers of more than 5 billion dirhams ($1.4 billion) of shares on the Dubai Stock Exchange since the beginning of August, more than 1 percent of its current market value, according to bourse data.
`More Integrated’
“The U.S. financial crisis has ramifications for all countries, including the Gulf,” U.S. Deputy Secretary of Treasury Robert Kimmitt said this week during a speech in Dubai, where he met representatives of sovereign wealth funds. “Our capital markets are more integrated than ever before, allowing opportunities, but also financial difficulties, to spread rapidly across borders.”
Of the Gulf states, Dubai may be hardest hit by a global economic slowdown because it has borrowed more to finance its transformation from a Persian Gulf trading post to a financial and tourist hub, and has only 4 billion barrels of oil reserves.
Government-controlled companies owe at least $47 billion, more than Dubai’s gross domestic product, and they will continue to accumulate debt faster than the economy grows, Moody’s Investors Service estimated in an Oct. 13 report. It concluded that Dubai may need financing help from Abu Dhabi.
Dubai-based Emaar Properties PJSC has shed more than 26 percent since Sept. 15 as investors lost confidence in the ability of the Middle East’s biggest publicly traded real-estate developer to finance projects by borrowing through local and international banks.
Real Estate Bust?
Dubai property prices will likely remain unchanged through 2010 after quadrupling in the past five years, Colliers CRE Plc said Oct. 5.
“There is a liquidity and credit crunch and now oil prices have fallen from $140 to $70,” said Nouriel Roubini, a professor at New York University. “I see the risk of a real-estate bust throughout the Gulf, but specifically in Dubai, and there’s a huge amount of excess capacity being built.”
That’s not keeping investors from betting on pain across the region. The cost of protecting debt from default has jumped more than fivefold since July for Abu Dhabi and Dubai, according to trading in credit default swaps. The cost of insuring Saudi Arabian government debt has risen 51 percent since Sept. 18.
The price of oil may determine whether governments can maintain government spending and support economic growth.
“If prices drop by $15 a barrel from the $60 to $70 mark, then they will probably not break even in terms of their budgets,” said John Sfakianakis, chief economist at Saudi British Bank in Riyadh.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net
Last Updated: October 30, 2008 22:09 EDT
Categories: CULTURE · REAL ESTATE · STOCKS
Tagged: emaar, forecast, oil
DFM GI up over 10% today, ADX GI over 6% (see previous posts).
DFM and many stocks that hit upper limits (15%) are still below 8 and 10 day moving averages.
It’s still to early party for the Dubai and Abu Dhabi stock markets.
Categories: STOCKS
Tagged: technical analysis
We said the indexes could bounce. They did on Thursday (ADX almost 1%, DFM over 3%)
Those are not the kind of bounces we had in mind, though.
Sunday, first trading of the week, the indexes resumed their downfall. Monday will be telling.
DFM went below 3,000 intraday.
Categories: STOCKS
The massacre continues (fresh multi-year low annihilating any semblance of support).
I’ll not call for a medium-term rally, i.e. a rally lasting from a couple to 4 months) simply because the market is not forming a floor.
However, the UAE markets are surely oversold. Maybe it’s time to step in and risk some capital at this point.
A RECAP of the situation now in DFM:
1. 6,320.44 was this year’s high and a major post-2005/6 crash top. As of today’s close, DFMGI has crashed 3,235.42 points, or 51.18%
2. At today’s intraday low 3,012.64, DFMGI was 40.62% below the 300-Day MA, and at roughly the same below the 200-Day MA, which is crossing below the 300-Day, a bearish sign.
3. At today’s intraday low, DFMGI was 33.81% below the 200-Week MA. In its history, the index has never been in such bearish territory. It remains to be seen how far below this indicator the index can go.
EMAAR:
1. At today’s 5.11 low, EMAAR hit a level 52.6% below the 200-Week MA, and around 50% below the 200-Day MA, and around 53% below the 300-Day MA.
2. As of today’s close, 5.50, EMAAR has lost 67.35% of its value since hitting the major top made early this year at 15.65.
Entering at current levels might not be a bad idea. The first profit-taking level should be at 20-30% gains achieved. Utilize trailing stops once any stock has gained 20% from entry.
From a fundamental standpoint, major central banks around the world are trying to calm markets by cutting interest rates. It remains to be seen if this measure will stabilize global equity markets. It should be clearer by the end of next week. Otherwise, we might be in for some exceptional nasty surprise, as these are the last bullets the big money authorities have left.
Categories: STOCKS
Tagged: emaar, forecast, technical analysis
Dubai Financial Market General Index has made a new 52WK low, a new low for the year, and a low not seen since 2005.
The outlook is very bearish, still.
Next bear target:
2,825
roughly the 76.4% FIBO level of the rise from the index’s beginnings (1,000) to the all-time high at
8,544.67
Rallies must be sold into with the above-mentioned target in mind during this bear market.
Categories: STOCKS
Tagged: crash, DFMGI, forecast, technical analysis
Mubadala Development Co., another investment arm of Abu Dhabi headed by Khaldoon Al Mubarak, is doubling its stock interest in AMD less than a year after its initial investment, when it paid $12.70 a share, triple the stock’s closing price yesterday.
“Obviously it’s been a very difficult year from the perspective of the performance of the shares of AMD,” Mubarak said. “That aside, we totally buy into the asset-smart strategy that AMD’s pursuing. We will be able to realize the type of returns that we had always anticipated.”
Abu Dhabi’s investment units are extending beyond oil and into technology, real estate and financial services. The emirate has stakes in Citigroup Inc., private-equity firm Apollo Global Management LLC and luxury carmaker Ferrari SpA. Abu Dhabi is the capital of the United Arab Emirates, which also includes Dubai.
Mubadala Development Co., another investment arm of Abu Dhabi headed by Khaldoon Al Mubarak, is doubling its stock interest in AMD less than a year after its initial investment, when it paid $12.70 a share, triple the stock’s closing price yesterday.
“Obviously it’s been a very difficult year from the perspective of the performance of the shares of AMD,” Mubarak said. “That aside, we totally buy into the asset-smart strategy that AMD’s pursuing. We will be able to realize the type of returns that we had always anticipated.”
Abu Dhabi’s investment units are extending beyond oil and into technology, real estate and financial services. The emirate has stakes in Citigroup Inc., private-equity firm Apollo Global Management LLC and luxury carmaker Ferrari SpA. Abu Dhabi is the capital of the United Arab Emirates, which also includes Dubai.
Abu Dhabi is increasing its exposure to AMD, and the U.S. technology sector.
AMD to Spin Off Plants, Gets $8.4 Billion Investment (Update3)
So, obviously the UAE’s biggest emirate, has no funding or “liquidity” (mot du jour) problems.
Categories: STOCKS
Today the market tanked.
1.88 failed and that was major recent support for this stock.
Next stop 1.68
Things are happening way too fast these days.
Upside target still valid in case a rally materializes, AND in case 1.96 holds under current bearish pressure.
(ARMX has not been very liquid lately, btw.)
The closes have been successively bearish since the last ARMX post, so if 1.96 fails then expect major major support around 1.88 to be tested and probably penetrated.
ARMX seems to have exited oversold conditions yesterday. It closed 11.50% higher and one fils (0.01) above the 75 day EMA, after blasting through the 10 day EMA.
The stock has been supported well recently at 1.89 close to a 76.4% major FIBO retracement level.
Next stop 2.37
where the 50% FIBO of the 2007 ascent resides…
Categories: STOCKS
Tagged: aramex, forecast, technical analysis
The Abu Dhabi and Dubai stock markets have declined much faster than expected. I said a few weeks ago that 3,700 was foreseeable should the DFMGI breakout under 4,900 and confirm an entry into a prolonged bear market.
3,735.29 got hit yesterday.
Obviously, I was wrong then about a possible bounce, and the 4,650 – 4,800 region barely provided a cushion for a dead cat bounce of less than 5%.
ADXGI has overshot my downside target and completely destroyed its Fibonacci support, a very bearish signal as the index now resides firmly below significant long-term moving averages.
Both DFM and ADX have just waterfalled, the downfalls much more rapid than I imagined.
Many global stock markets have experienced similar declines during the same time frame.
Other securities too show similar charts (Australian Dollar, Pound Sterling, Oil, Silver, Platinum, etc.)
The US Dollar has strengthened significantly during this period.
The nature of the recent declines in UAE equities signals a confirmed entry into a prolonged bear market that will probably last years. Price action suggests companies don’t have the appetite to pay out dividends, and instead will prefer to hold cash as banks struggle to finance the myriad projects around the country.
In this continuing bear market, I expect bounces in the UAE indexes to be big (to range between 12% to 40%), given the rapid decline and its magnitude.
I suspect there is more work to do on the downside, much below recent lows for the indexes and individual stocks.
ALSO:
Al Dar Properties had been struggling lately.
Now its bull run is definitely dead.
On Sunday 14SEP2008 the stock easily cut through a major Fibonacci support level @ 7.33
This stock will probably trade in the 6 handle within the next year, as ADX is experiencing a bear market that has only just started.
