Dubai Stocks Crash On Levered Liquidations, Margin Calls Turmoil

Tyler Durden's picture

Long before there was a Greece (and its existential threat to world order), there was Dubai's sovereign crisis in 2009 with Nakheel; and Dubai World (the floating islands) faced with massive debt loads and interconnectedness were bailed out. Since then it's been nothing but ponies and unicorns... until now. The debt is all still there (and the interconnectedness)... and despite the mirage of wealth creation that equity's massive rally has created, the drop in Dubai's stock market we noted yesterday turned into a rout overnight as it dropped a further 8% as one of the countries largest companies (Arabtec - Dubai's largest builder) plunged after high-level executive dismissals. “This is indiscriminate selling,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, said by e-mail. “The markets took the stairway up, and an elevator down.”

 

 

As Bloomberg reports,

Dubai stocks dropped the most in 10 months following top-level dismissals at Arabtec, the United Arab Emirates’ largest-listed builder.

 

Arabtec dropped 9.8 percent to the lowest since January after the company confirmed it cut staff. People familiar with the matter said yesterday the company’s chief operating officer, chief information officer and chief risk officer have been fired.

 

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The builder’s shares plunged 53 percent so far this month as Abu Dhabi state-run Aabar Investments PJSC cut its stake, stoking speculation the builder was losing government backing.

Dubai's speculative bubble looks to be bursting...

“Selling pressure on Arabtec is causing margin calls on retail investor accounts, hence the big move down across the U.A.E. as a whole,” Nayal Khan, head of institutional sales and trading at the Naeem Holding brokerage in Dubai, said by e-mail.

 

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“The market wasn’t able to resist the turmoil that has been triggered by Arabtec,” Montasser Khelifi, senior manager for global markets at Quantum Investment Bank Ltd. in Dubai, said by e-mail. “At this level we’re starting to see good buy opportunities, but this doesn’t seem to be the opinion of the majority of the market players.”

 

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“This is indiscriminate selling,” Ramez Merhi, director of asset management at Dubai-based Al Masah Capital, said by e-mail. “The markets took the stairway up, and an elevator down.”

The world's sovereign debt crises started in Dubai so it would be somewhat ironic if the central planners' bubble would start to crack first in this construction-bubbler-prone state...