UAE stocks fell, erasing gains made over the year, as oil extended its drop to fresh six year lows.
The drop in Dubai and Abu Dhabi stocks also comes as investors sell risky assets in emerging markets ahead of an expected interest rate increase by the US Federal Reserve. Concerns that the global economy may slow amid a brewing financial crisis in China also weighed on investor sentiment.
The benchmark Dubai Financial General Market Index was 3.6 per cent lower at 11.40am, dragged lower by Emaar Properties, the biggest publicly traded real estate developer in the UAE. Year to date, the index is heading 2 per cent lower after today’s drop.
Meanwhile in Abu Dhabi, the emirate’s key stocks guage shed 1.6 per cent, led by a drop in FGB, the biggest publicly traded bank in Abu Dhabi. If the index doesn’t rebound today, it will be heading 0.6 per cent lower year to date.
Emerging market equities have been among the most unloved assets in recent years as weakening demand for commodities globally has taken a toll on many of these nations that rely on exports such as oil, gas, wheat and sugar to bolster economic growth.
But because overall global growth has been lacklustre, price inflation has slowed and commodity prices have been declining or treading water. Oil, which fires up growth in the crude-rich Arabian Gulf, has been declining in part because of weakening demand from China as factories reduce output amid softening demand for the country’s exports.
Crude has shed more than 50 per cent of its value in the past 12 months. Production by countries including the United States has risen, while demand has waned amid economic uncertainty.
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