Dubai’s Stock Market Shows It’s Being Hit Harder by Coronavirus and Oil Prices
Dubai’s Stock Market Shows It’s Being Hit Harder by Coronavirus and Oil Prices
(Bloomberg) --
Dubai is being battered harder than its Gulf peers by the twin menace of the pandemic and weak oil prices -- and it’s clear from the performance of the city’s stock market.
The DFM General Index is down 26% since the global equities crash at the start of March. A slump in stock prices as the United Arab Emirates took steps to counter Covid-19, including shutting its borders, deepened as crude spiraled lower.
But markets in Dubai’s neighbors are showing signs of improvement as hopes the worst of the outbreak is over take hold and amid expectations of a production agreement between the biggest oil suppliers that will boost prices. Stock benchmarks in Qatar and Saudi Arabia have almost fully recovered from the sell-off. Abu Dhabi’s main index is down just 15%, further highlighting Dubai’s underperformance.
Dubai’s recovery is being held back by the emirate’s heavy reliance on sectors such as tourism, hospitality, trade, retail, logistics and real estate. The pandemic’s long-term effects on these key industries remain hard to quantify.
“The social distancing because of coronavirus has hit the tourism, services and airlines hardest, and those are the most important sectors for Dubai’s economy,” said Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital Ltd. in Abu Dhabi. “There is a ripple effect of such measures on listed real estate and banking companies.”
Emaar Properties PJSC, Dubai’s biggest listed developer, and two of its subsidiaries announced last month they won’t pay dividends for 2019. There was more bad news from the financial sector: Dubai Islamic Bank PJSC and Emirates NBD PJSC, the two largest locally listed lenders, are among the ranks of U.A.E. banks whose shares tumbled after disclosing exposure to troubled hospital operator NMC Health Plc.
While the U.A.E. said this week it is unlocking new aid and reducing banks’ reserve requirements to counter the damage from the virus, Dubai’s government added to the gloomy atmosphere on Thursday, saying it is freezing all hiring and cutting administrative spending by at least 20% across departments.
“We don’t know how far this will go, how long those measures will last,” Yasin said. “But we know that revenue misses for Dubai’s government will be substantial in 2020, and that raises concerns for many of the entities in Dubai.”
©2020 Bloomberg L.P.