Market meltdown burns some worse than othes

Tamweel, the Islamic mortgage finance company listed on the Dubai Financial Market, has been beset by problems this year, and the market chaos and uncertainty has only served to exacerbate the situation. Since reaching Dh8.50 (US$2.30) in June, its stock price has nearly halved to Dh4.68. Last Thursday alone, it fell by 6.21 per cent. This has been for a host of reasons, most notably the police investigation into alleged corruption in the Dubai housing market, which has seen a number of current and former Tamweel executives arrested. Despite Tamweel stressing it would not affect profitability, the shares have continued to decline, with some investors admitting that as soon as they see a company's current or former executives arrested, they immediately dump the stock without waiting for the conclusion.

The announcement last month that Tamweel expected to achieve stronger results in the coming six months after reporting a first half net profit of Dh387.3 million, was virtually ignored. On top of this was Morgan Stanley's report last month that predicted Dubai property prices would fall 10 per cent in the next two years, which soured investor confidence in the whole housing market. To cap it all, Tamweel had to admit its deputy chief executive had also been detained by police.

DP World has not had the same number of allegations thrown at it as Tamweel, but it goes to show that this market does not necessarily care whether firms are squeaky clean and bursting with profit - the shares will be marked down in any case. Listed on the Dubai International Financial Exchange, the global ports operator has declined in value from US$1 to $0.62 in three months; since the start of the year it has virtually halved in value. This was despite announcing last month that its first half post-tax profit more than doubled to $287m on its Middle East and Africa operations, despite the global economic slowdown. The figure last year was $129m. Despite reporting generally positive news throughout the period, with strong, continual growth, its shares continued to fall, perhaps illustrating that those who were selling its shares were divesting themselves of their entire UAE and even GCC portfolios.

Etisalat, the phone company listed on the Abu Dhabi Securities Exchange, has fared better than most, possibly because phone usage is not a service identified as likely to be hit by the current global turmoil. In June, Etisalat - which has a market capitalisation of Dh99 billion - was trading at Dh19.55; by this month it had fallen just Dh3, to Dh16.50. The only noticeable piece of bad news for the firm was when an Etisalat employee was accused his month of embezzling Dh27m, but remarkably the firm's stock even rose slightly that day. However, few people are willing to predict a comfortable ride for any stocks in the months ahead.

afoxwell@thenational.ae