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Dubai: Investors continued to dump stocks of Tamweel, the largest real estate finance provider in the UAE, after news spread on Thursday that two of its former high-profile officials have been arrested on allegations of embezzlement and mistrust.
The company's shares fell 4.09 per cent on Sunday to close at Dh5.86, extending the losses to 9.8 per cent in the last two sessions. On Thursday, it declined 5.71 per cent to close at Dh6.11.
"In terms of investors and how they react to this kind of news, you can see it from what happened to the stocks on Thursday and today," said Anne Marie Browne, foreign institutional sales analyst at Al Futtaim HC Securities in Dubai. "It obviously had a sudden impact regardless of the fact that the [second quarter] results of the company was excellent. But investors react to such news negatively and immediately."
Tamweel announced in late July that its second quarter profits had more than tripled to Dh210.95 million ($57.43) from the same period last year.
The latest arrest of Adel Al Shirawi, the company's former chief executive, and Feras Kalthoum, former investment head, comes in the wake of a series of such high profile arrests of top officials of other prominent firms, including public-listed Deyaar Development and Dubai Islamic Bank.
In late March, Zack Shahin, chief executive of the third-biggest property developer in Dubai, Deyaar Development, was arrested on embezzlement charges, with two more executives arrested later. And in June, a former vice-president of Dubai Islamic Bank, of which Deyaar Development is an affiliate, was being held on bribery charges. DIB owns 41 per cent stake in Deyaar.
Exaggeration
However, as Rami Sidani, head of Mena Investments of Schroders Investment Management, feels that the reaction of the market in the past two days was a "bit exaggerated." Various factors, he believes, have combined to influence investor sentiments.
"The way I see it - there is a negative sentiment prevailing in the entire market and the stocks are suffering because of these incidents," Sidani said.
"At the present moment there is an absence of buying opportunity and domestic money is out of the market due to the dormant summer season, which is going to be followed by the slow month of Ramadan. The international investors are busy in other markets. Now the domestic liquidity won't be back before September. Accordingly, the lack of liquidity in the market has exacerbated the reaction in these stocks," he said.
In early July, Shehab Gargash, managing director of Daman Investments, had publicly said that Deyaar and DIB are partly to blame for the poor performance of the Dubai Financial Market.
Market analysts have welcomed the Dubai government's announcement of zero tolerance towards corruption. "Obviously it is a positive step that the government has announced which will be well received by investors and create higher standards and make companies more transparent," Browne said. "Whether it will have direct impact on stocks or not it is hard to say."
Sidani agrees. "This will enhance our transparency in our financial market and attract international interest further," he said.
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