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Abu Dhabi: Market mover Emaar Properties, which is building the world's tallest tower Burj Dubai, suffered on Wednesday as margin call and panic selling brought down its price to Dh9.75.
On day of setbacks, Dh12.1 billion was wiped off the UAE markets.
The Emirates Securities general index plunged 2.15 per cent to 4,166.01, squeezing the recorded gains since the beginning of the year to 3.35 per cent.
Most analysts forecast further decline saying that investors who liquidate today will be reluctant to return as long as the downward trend continues.
Dubai's general index plummeted below the 4,000 mark for the first time in almost a year, declining by 2.44 per cent to 3,968.09, while Abu Dhabi's benchmark retreated by 1.95 per cent to 3,327.86.
In Dubai, Emaar continued to record heavy losses, and fell by 3.47 per cent to Dh9.75, as the company failed to impress investors during a teleconference on Tuesday by announcing that the details related to the share-swap with Dubai Holding are to be announced in September, the fourth postponement since the partnership was announced more than four months ago.
The company did not renew its application for the 10 per cent share buy-back, as many analysts agree that the liquidity available for the developer can be better placed in expanding the business and providing for more value to investors.
"This represented a serious lack of transparency that negatively affected investor sentiment, and accordingly resulted in more sell-offs," Rami Sidani, senior associate partner at Shuaa Capital, said, referring to the Dh2.1 billion worth of losses in market capitalisation recorded by the company yesterday.
Emaar's trading value represents about 60 per cent of Dubai Financial Market's overall trading volume.
Lowest since 2004
Emaar Properties, the largest listed UAE developer recorded its lowest price since November 2004 by yesterday's market close, and the lowest ever since the company's 1:1 rights issue of July 2005.
With pressure mounting from international markets, as foreign investors continue to liquidate their positions in the UAE to cover up for losses incurred in the US and Asia, many analysts attribute the fast-paced decline of Emaar to its exposure to the US property market.
"This is purely due to margin call and woes related to Emaar's exposure to the US subprime crisis," Krishna Murthy, chief executive of the Financial Services arm of Al Rostamani Group, told Gulf News.
"Although the market fundamentals remain strong, volatility is likely to continue. Buyers, who were shying away, will now enter the Emaar counter and switch portfolio."
Emaar's fully owned John Laing Homes unit operating in the US will report less than expected results in the third quarter due to the current crisis hitting the US subprime mortgage market, company officials said. "According to the first half results the US unit is responsible for 16 per cent of the company's revenues, while 80 per cent come from Dubai," explained Sidani. "However, due to the difference in margins, the effect is diluted in the net profit to only 3 per cent," he added.
John Laing Homes operates mostly in the private homes business, which will be affected by the housing market crisis, but not as much as the subprime mortgage segment, hence less revenues but not losses are expected, said Sidani.
Foreigners accounted for about 40 per cent of the volume of traded shares in the Dubai Financial Market during the first half of the year, and accordingly represent a swaying factor.
Nevertheless, the sequence of unfortunate events only began with the foreigners' withdrawal, as the company's projected partnership with Dubai Holding remains an issue of concern, experts felt.
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