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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.

 

...

 

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.

 

...

 

“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.”

 

...

 

“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...

 

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Tue, 06/24/2014 - 08:26 | 4888694 TeamDepends
TeamDepends's picture

Aaaaand it's gone!

Tue, 06/24/2014 - 08:33 | 4888719 slaughterer
slaughterer's picture

The Dubai/Abu Dhabi selling is actually due to a planned tightening of regulation and oversight (i.e. surveillance) in Middle Eastern markets announced last week.  All of that Middle Eastern money will quickly flow into US markets.

Tue, 06/24/2014 - 08:58 | 4888782 SuperRay
SuperRay's picture

Uh- oh. An attack of the Truth! All hands on deck!!

Tue, 06/24/2014 - 09:22 | 4888859 jbvtme
jbvtme's picture

when will be a good entry point dubai?

Tue, 06/24/2014 - 09:29 | 4888903 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Panic and margin calls in one market result in forced selling in another. Where will this strike again?

Tue, 06/24/2014 - 09:42 | 4888971 NoDebt
NoDebt's picture

Looks like it's hit strong technickal support around the 4000 level.  I'd say buy now.  It's going to retrench and off to the moon again.

Pffft.... heh heh.... sorry, I can't even say it with a straight face.

Tue, 06/24/2014 - 10:01 | 4889064 Phat Stax
Phat Stax's picture

and tomorrow is Bigo Pomo Day.

Tue, 06/24/2014 - 08:26 | 4888695 jubber
jubber's picture

US doing their best to ramp everything back green

Tue, 06/24/2014 - 08:31 | 4888712 TeamDepends
TeamDepends's picture

The Dubai PPT is composed of community organizers and other assorted rabble.  We'll show them how it's done.

Tue, 06/24/2014 - 08:43 | 4888740 GetZeeGold
GetZeeGold's picture

 

 

You don't organize over there.....you die!

Tue, 06/24/2014 - 08:26 | 4888696 youngman
youngman's picture

At one time they were the biggest user of cement in the world...it was all going to Dubai....

Tue, 06/24/2014 - 08:26 | 4888698 buzzsaw99
buzzsaw99's picture

“The markets took the stairway up, and an elevator down.”

What a bunch of crap. It took the exact same amount of time to go down that it did going up. notice nobody ever complained about indiscriminate buying?

Tue, 06/24/2014 - 08:32 | 4888718 TeamDepends
TeamDepends's picture

Sell, Haji, sell!!!

Tue, 06/24/2014 - 08:41 | 4888736 buzzsaw99
buzzsaw99's picture

Haji?

Yes?

This is your broker, margin call.

I don't have any more collateral you son of a goat herder!

Too bad, we are selling your entire position. Good day!

Tue, 06/24/2014 - 09:04 | 4888796 holgerdanske
holgerdanske's picture

Errh, you might have missed a coupple of lessons there, but if you look at the slope of the graph ascending (market going up), it is not as steep as the descending slope, market going down.

So it has fallen faster than it rose, but obviously nothing compared to what might be in store, there and here, when people finally wake up and look down.;-)

Tue, 06/24/2014 - 08:27 | 4888699 ENTP
ENTP's picture

Easy fix, just build a Belgium or find an Albino Hobbit to get out of monetary issues. 

Tue, 06/24/2014 - 08:32 | 4888714 ParkAveFlasher
ParkAveFlasher's picture

Remember kids, if you gotta sell something fast, the best way to do it is to buy it yourself!  

Tue, 06/24/2014 - 08:28 | 4888700 TheReplacement
TheReplacement's picture

Ok, first there were skittle shitting unicorns (which is okay if you are into that sort of thing) and I was like, meh.

Are you telling me there are ponies!  Sign me up now!!!

Tue, 06/24/2014 - 08:28 | 4888701 we built this city
we built this city's picture

no effect on Europe at all- 

russian index up almost 3%

no effect on my short portfolio yet.....

 

And yet another bearish title......

Tue, 06/24/2014 - 08:30 | 4888705 Cognitive Dissonance
Cognitive Dissonance's picture

The load is shifting to the other side of the boat. Got galoshes?

<Camel....meet straw.>

Tue, 06/24/2014 - 08:40 | 4888731 ziggy59
ziggy59's picture

Shit; meet fan...

Tue, 06/24/2014 - 08:51 | 4888760 GetZeeGold
GetZeeGold's picture

 

 

No worries......they can always call Belgium.

Tue, 06/24/2014 - 08:29 | 4888706 deerhunter
deerhunter's picture

if a tree falls in a forest,,,,,,,,,,,

Tue, 06/24/2014 - 08:32 | 4888716 ENTP
ENTP's picture

but Steve Liesman is sent to report on it...does it make a sound to the Steeple?

Tue, 06/24/2014 - 08:31 | 4888715 Dubaibanker
Dubaibanker's picture

Iraq / Ukraine crisis, oil price spike, gold spike, rumour mongering, FIFA Qatar 2022 withdrawal fears are all playing as catalyst. Not to mention that the markets were overheating and had risen over 200% in the last 2 years. Arabtec had gone from AED 1 to AED 9.88.

A little bit of reality and little bit of correction. Arabtec is the major contracting company but not the only one.

Collapse like Citibank or Lehman, dont think so. With so much fear, markets can go down a bit more and go back to barely mid 2013. A lot of liquidity has flown in, in the form of bonds, markets are just getting over sold. This is what happens when the markets are too small but too connected to this viral internet world.

People are putting too much into this situation. Not many people invest in these markets. It has no consequences except on itself.

Tue, 06/24/2014 - 09:24 | 4888867 Crazy Or Not
Crazy Or Not's picture

With respect....
Utter Horsecrap!

The towers all LOOK glam on the outside ....BUT the engineering specs are that of origami.
Put 4 drawer file cabs of phone books in a cluster on floor 28 and it'll be in the basement in freefall.
Dubai and all GCC's are Earthquake Haz. Zoned.
Think Alan Bond (Oz) Crop spraying desert with green paint and selling to Japan investors as Golf Course Villa sites.
Concrete needs 3days to cure and is mixed with ice to delay the 3hour cure in 110ºF. 
Seawater is frequently used when they run out of fresh - which is all summer long.
Seawater rusts steel reinforcement in concrete...
Ponzi started by US engineering firms to win back oil expenditure. - 
It's all a sick joke and more fool the investors suckered into it. 

someone's Crazy here - but it ain't me. 

Tue, 06/24/2014 - 10:34 | 4889198 Dubaibanker
Dubaibanker's picture

I really hope you have heard of this thing called 'science'.

Couple of things about earthquakes in Dubai.

Earth's fault lines are towards Pakistan and Iran, across the Gulf (which is why we hear most earthquakes in that part). On this side, the fault line ends at the northern tip of UAE around Fujairah which is about 200-300 kms from Dubai.

Secondly, Dubai just started building houses since 2002. Apartments have a life of 30-40 years in this weather heat and villas have around 40 plus years if decently maintained. This is the reason the pricing is lower than cold weather countries and should remain so. Regardless, thousands of houses are sold to foreigners who are now calling Dubai home for their own reasons. Believe me, most new houses do not have local users. Most major projects are sold to people with real money from other countries which helps stabilise Dubai because it is new money which is not on leverage.

Thirdly, Dubai has worked on desalination plants just like all Middle East has and now they are conserving both water and electricity and have doubled the pricing in the past 5 years. This is how life works here because there is no other sources of water.

There are various lake like things from Oman to Northern parts of UAE and eastern parts of UAE have mountains where you find 'wadis' or pools of fresh water but they are insufficient for the large consumption needs.

Finally, the structuring of the tall buildings here is done by Koreans, Germans and Americans. So if they dont know what to do with science and allow an inconic building to fall, then you can't fault Dubai for it. Dubai never claimed that they have built it indigineously with domestic science. They built it with the help of the very best scientists and architects from around the world.

I am no scientist but I know that the piling of the Burj Khalifa has been done by drilling into the rock below, hundreds of meters deep. This helps the building remain stable and sway with any movement along with the rock. It can move about 2 meters at the very top in high winds due to its structure made of steel above a certain height. Finally, I am told that any earthquake even right below/at the structure and the tower will hold for at least 2-3 minutes. That is the strength of the structure despite the sand. Because after a few meters below the sand, after all, all over the world there is rock.

Some more info here: http://cenews.com/article/7709/design_and_construction_of_the_world_acut...

Some real technical stuff from the architects and builders here: http://www.ctbuh.org/LinkClick.aspx?fileticket=DUN2DTspi%2Fs%3D&tabid=46...

You may think there are fool investors but Dubai is so small in size that hundreds of new people every year are enough. As you know, we have over 7.2bn people on this planet, whats wrong with collecting a few rich people around here instead of say, London, NY or elsewhere?  Humans are always on the move to a 'better' place or anywhere they can make a living. In the history of the world, new cities and new places have been discovered and old ones left behind. Else, all of us would still be living in Rome or Persia perhaps?
Tue, 06/24/2014 - 11:48 | 4889502 Crazy Or Not
Crazy Or Not's picture

Thanks for the "science" lesson - from a banker(?) with of course no vested interest? (sarc)
Are you an engineer?

There is a skewed perspective in the ME /GCC region - which you can do when the developer's owner is also the government and the legislator. So "facts" are always open to local interpretation or dare i say gagging?

For example why is there little or never any mention of Global Warming and sea level rises in Gulf states - possibly because Countries like Qatar are only 7mtrs above sea level.....just maybe? 

As for the Earthquake issue - sure Iran is at the more volitile side of the plate but if you build in San Francisco you build to codes WHICHEVER side of the plate you build on....If you fear the legislator that is, unless you are the legislator (geddit?)

London for eg(not an Earthquake region) - builds to double the stress loadings of GCC high rise. Because that is considered SAFE. Neither does it have the wild temperature changes -which cause cracking of GCC.

You  have to agree these buildings are built cheap to attract foreign capital (and citizenship with tax incentives) and built with commodity exchanges of technology for oil revenues. One could also mention Kefala system and forced labour or non published accidents or heat exaustion and human rights violations....all to build on the cheapest budgets possible.

I do give it to you that there are some stunning designs - though it is also not uncomon to hear or see exploding glass as flexibility has not been fully studied - always expensive and more so in a edgy one off design.

40 years is a max 30 is optimistic. GCC banks work on 20 years for most of their models.

The Seawater usage is documented and subject of ongoing legal fights right now.

I still say investors are going in one eye open at best and mostly will get ripped.

I'm not alone on this

See John Perkins:  Confessions of an Economic Hit Man
or blog sites like
http://www.qatarsucks.com/

 

Tue, 06/24/2014 - 12:19 | 4889656 Dubaibanker
Dubaibanker's picture

I have no vested interest...hehehe...I am here just to share some knowledge and to learn.

It is possible to gag info and we all have to assume that it happens. For example, in Palm Jumeirah which is an island like body, fully man made and largest man made city setting in water in the world, they have built a break water. So if sea warming happens it should be a bit controlled. I am pretty sure it will be less because of the way Gulf Ocean is coming through a narrow inlet/outlet of Strait of Hormuz. I hope it will not happen much. It will not only be Gulf's problem but the whole world's.

I get your point on earthquake but if you know how Dubai and the ruler operates, there is not much scope of making mistakes. He rules the place like a CEO but is harsh on people hurting Brand Dubai and is very practical and quick thinker and quick decision maker. He has built this city from scratch since he was born but mostly in the last 15 years and taken it to become a global city where the world's best come to party, travel, shop etc. Most MENA region people cannot get visas for EU or US or UK so they end up in Dubai which is why Saudis are coming at 1.1m per annum! I have not heard of any building having fallen here though some do catch fire which has been addressed a lot with law changes and strict rules on smoking (no running away from idiots anywhere).

All sorts of stuff happens everywhere in the world in terms of labour and human rights. But each country has their own way of doing it. California has rapes in the strawberry fields and millions of undocumented workers. Same in many European cities. Have you heard of recent rape incidents in India? Are they not the same human rights violations? Africa is bad too. But Dubai takes care of the poor as much as possible and yes there are some issues but mostly have been resolved. Poor people have no respite nowhere in the world.

Glass heating or overheating should not be much of an issue because the airconditioning runs full blast here at below 20 deg inside so acts as a bit of a coolant on the glass I guess. Nor have I heard any accidents where glass explodes in the buildings despite fire incidents.

Sure, banks work on lower gesttaion periods for mortgages etc. but real life is around 30 to 40 years and can last longer with todays modern technolgy in place.

No argument on seawater impact. There have to be a negative impact but what is the Gulf supposed to do? They cannot relocate! They have to work with what they got!

Ripping off is possible but the case is same in Australia or Canada or USA if the price of property falls or an earthquake happens or whatever else happens. Nature can strike anywhere!

I guess most people buying in Dubai are making a bet that they will recover their money few years down the road and worst case rent it to someone else, because Dubai is not going to dubai. It has just started building. In 10 years or 20 years, Dubai will still be here, but I dont know about what will be going on in the streets of Europe with all the unemployment and closures or in USA with all the debt and polarisation or anywhere else.

Tue, 06/24/2014 - 12:26 | 4889671 Crazy Or Not
Crazy Or Not's picture

While I was waiting for your next response....

Perhaps other readers who are interested can look here:

(BBC are Dubai buildings safe? )

(Earthquake Study from Saudi University)

(USGS Middle East Survey Map)

(Regional Paper - Article on poor construction quality )

I think that should cover it? 
I just beg to differ with much that you have said Thanks

 

Tue, 06/24/2014 - 14:43 | 4890192 Dubaibanker
Dubaibanker's picture

Appreciate the links.

However, Saudi studies do not correlate to what happens in Dubai. The map is useful but it does indicate 1.6 or below levels for Dubai so not much risk.

Dubai always takes the lead in terms of rules of safety in the region. As the BBC presenter noted, high rises have had no rule changes. The impact of changes for seismic zoning is for towers, if you can call them that, of heights below 10 storeys. Taller ones are already under extremely stringent criteria.

Until a building falls apart like Tower 7 or WTC buildings of NYC, we dont believe that there is much to worry about it. We just have to worry as much as people in any other country would.

No country can build 100% earthquake proof buildings. We just have to work with what nature has given and all its constraints and make as stringent rules as possible and evolve when something occurs.

Did anyone know when the Great London fire happened in mid 16th century? But London learned from it and made more stringent rules and call itself a major 'safe' city today. Lets hope Dubai follows the rules and has learnt from the experiences of others and will keep evolving and be able to prevent any major catastrophe.

Tue, 06/24/2014 - 08:32 | 4888717 101 years and c...
101 years and counting's picture

arabtec dropping because its cutting staff and execs.  in the developed world of money printing, this would be an extremely bullish scenario.

Tue, 06/24/2014 - 09:44 | 4888991 NoDebt
NoDebt's picture

Agreed. The goal is zero employees, zero product, all shares repurchased.  Out of business, but with a killer P/E ratio.

Tue, 06/24/2014 - 08:35 | 4888722 jubber
jubber's picture

Gold and Silver putting up a decent fight this morning

Tue, 06/24/2014 - 08:38 | 4888727 I Am Not a Copp...
I Am Not a Copper Top's picture

Have no fear stock bulls, it's Tuesday!

Tue, 06/24/2014 - 08:39 | 4888729 buzzsaw99
buzzsaw99's picture

thy rod and thy pomo, they comfort me...

Tue, 06/24/2014 - 08:46 | 4888747 nmewn
nmewn's picture

Not that there's anything wrong with that ;-)

Tue, 06/24/2014 - 08:46 | 4888748 GetZeeGold
GetZeeGold's picture

 

 

The low hum of the printers is such a soothing sound.

Tue, 06/24/2014 - 09:23 | 4888868 Tall Tom
Tall Tom's picture

Thy rod and thy porno???

 

I need glasses...

Tue, 06/24/2014 - 08:40 | 4888732 IridiumRebel
IridiumRebel's picture

We're all gonna be fine. We got printers and PPTs and an awesome leader.

Tue, 06/24/2014 - 08:40 | 4888733 jmcadg
jmcadg's picture

Waiting for Cramer to rant on about this as a buying op.
Not that I watch such shit, been told :)

But if this become a dash for liquidity, perfect cover to ... smash the metals!
Not that they need it as Option Expiry and 1/2 year window dressing is upon us.

Fuck I think the metals are going to be hit hard this week!

Tue, 06/24/2014 - 08:44 | 4888744 nmewn
nmewn's picture

"There is nothing wrong with Dubai!" - Jim Krammer

Tue, 06/24/2014 - 08:42 | 4888739 Seasmoke
Seasmoke's picture

I was wondering why I hadn't read any stories lately, if the Sheik buying our best thoroughbreds this year. 

Tue, 06/24/2014 - 08:44 | 4888742 jmcadg
jmcadg's picture

Hardly a thoroughbred, but Kerry is available to be bought!

Tue, 06/24/2014 - 09:12 | 4888823 Winston Churchill
Winston Churchill's picture

Only two glue factories bid.

They have standards to maintain.

Tue, 06/24/2014 - 08:43 | 4888741 nmewn
nmewn's picture

Clearly this calls for a Cash for Camels government intervention program or sumpin.

Tue, 06/24/2014 - 08:44 | 4888743 hugovanderbubble
hugovanderbubble's picture

Short Venezuela, Argentina, Spain and France

Tue, 06/24/2014 - 08:45 | 4888746 gdiamond22
gdiamond22's picture

But Yellen does not see any leverage or margin issues on a global scale?

 

Must be noise.

Tue, 06/24/2014 - 08:55 | 4888770 strangeglove
strangeglove's picture

If you shat Dollars you wouldnt see it either.

Tue, 06/24/2014 - 08:50 | 4888757 ms8172
ms8172's picture

hmmmmm that chart looks just like the S&P 500....what's next?

Tue, 06/24/2014 - 08:57 | 4888775 buzzsaw99
buzzsaw99's picture

new highs for the rest of our lives

Tue, 06/24/2014 - 08:57 | 4888777 Ban KKiller
Ban KKiller's picture

Short term, zero rate funding ran short and the accountants won't jack the numbers? Oops, time to resign and move to the condo in Vancouver. Fraud pays very well if you can hide the profits....buy real estate at any cost to close quickly at all cash. Fascist oligarchy perfected this ploy...see China.

Tue, 06/24/2014 - 08:58 | 4888781 TabakLover
TabakLover's picture

Calling 1987, hello 1987.

Tue, 06/24/2014 - 08:58 | 4888784 FreeNewEnergy
FreeNewEnergy's picture

Yellen... for the win!

Tue, 06/24/2014 - 09:01 | 4888790 ptoemmes
ptoemmes's picture

Not sure if an Allahu Akbar is approprate or not.

Tue, 06/24/2014 - 09:15 | 4888830 nmewn
nmewn's picture

Ya gotta say it with blind panic happening in the background or its just not the same.

Oh, wait...lol.

Tue, 06/24/2014 - 09:21 | 4888854 Tall Tom
Tall Tom's picture

If they were on the Short Side of the Trade then I am sure that many were yelling that.

Tue, 06/24/2014 - 09:05 | 4888793 darteaus
darteaus's picture

This places look nice, but every country over there is building them now-Qatar, Saudi, etc.

And, at the end of the day, you gotta remember that you are buying a house built on sand in sea water where you are surrounded by tens of millions of Muslims.

Tue, 06/24/2014 - 09:20 | 4888845 Squid Viscous
Squid Viscous's picture

Is there a Dubai ETF I can buy before they paper this little problem over, again...?

Tue, 06/24/2014 - 09:23 | 4888866 TrustWho
TrustWho's picture

“The markets took the stairway up, and an elevator down.” 

Why make money when you are only creating armageddon? This makes me so angry at the Federal Reserve and Central Bankers with the support of all the "smart" investors. Everybody knows, everybody is anxious so the elevator may fail to describe The Fall.

Tue, 06/24/2014 - 09:25 | 4888872 rsnoble
rsnoble's picture

Meanwhile calls in the US for DOW 44k:

http://finance.yahoo.com/blogs/breakout/bull-markets-don-t-die-of-old-ag...

They fail to mention mass starvation and $50gallon gas.  What a crock.  And no, I did NOT watch the video.  Waste of time.

Tue, 06/24/2014 - 09:33 | 4888934 Mi Naem
Mi Naem's picture

What video?  :)

Tue, 06/24/2014 - 09:26 | 4888882 cobra1650
cobra1650's picture

Send some jewish bankers in there...they will ramp it up and fix it.

Tue, 06/24/2014 - 09:33 | 4888927 Mi Naem
Mi Naem's picture

Our US market crash can't be too far away. The Trade Winds are blowin' pretty hard. 

For example, I'm now seeing this crap on Yahoo:

Bull markets don’t die of old age, why Dow 44,000 may be coming

...when bread is $50 a loaf for the new and improved 9oz size. 

Tue, 06/24/2014 - 09:49 | 4889010 moneybots
moneybots's picture

During the housing bubble, someone wrote, "next Stop, Dow 21,000."  The Dow stopped at 14,000 and wound up at 6,500.

Tue, 06/24/2014 - 09:48 | 4889001 moneybots
moneybots's picture

That looks just like a chart of the Dow Jones Industrials when it crashes.

Tue, 06/24/2014 - 09:57 | 4889047 JRobby
JRobby's picture

This was called yesterday no?

Dominoes!

 

Tue, 06/24/2014 - 10:01 | 4889060 JRobby
JRobby's picture

That will be a great place to film a post apocalyptic movie once the inhabitants have vacated. A few can stick around to be "extras". They will need the catering truck food.

Tue, 06/24/2014 - 11:39 | 4889494 damicol
damicol's picture

yep retarded low IQ superstitious  savages called muslims are there.

 What could possibly go wrong. The libtards still think they are normal, just like syrians and iraqies and the rest of the fucking arabs.

And people send thier money there.

 Who the fuck is dumber

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