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Abu Dhabi: Another Dh50.73 billion were wiped off on Tuesday as UAE stocks declined for a fifth consecutive session, taking the losses in the market since Wednesday to about Dh132 billion.
The market value of the UAE-listed shares fell from highs exceeding Dh880 billion ($239 billion) last week to Dh748 billion ($203 billion) on Tuesday.
The panic selling, mainly led by foreign investors, came after fears of a recession in the US and its implications for the global economy increased.
Pressure also mounted on Gulf countries to either depart from the dollar peg or revalue the exchange rates to avoid the complications of an aggressive rate-cut policy most likely to be adopted by the Federal Reserve.
The vast majority of the shares lost on average eight per cent.
Bush package
"The failure of [President] George W Bush's stimulus package to address the severe shortage of liquidity in the US market has taken its toll on the global financial markets in general and GCC equities in particular," said Mary Nicola, an economist at Standard Chartered Bank.
"International financial markets are interrelated, and the value of the dirham is not the direct cause for the crash of UAE's stock prices, yet in the short term the negative impact of a recession in the US will be obvious here," she added.
The Emirates Securities General Index dropped 6.39 per cent to 5.450.49, accumulating 9.4 per cent of losses since the beginning of 2008.
In Dubai, the general index nosedived 6.21 per cent to close at 5.210.58. At one stage the index was down nearly 10 per cent.
All the big players recorded heavy losses, including Emaar Properties, which fell 6.15 per cent, Dubai Financial Market (11.34 per cent), Air Arabia (8.72 per cent), Deyaar Development (9.16 per cent) and Amlak Finance (9.39 per cent).
The departure of the UAE's monetary and fiscal policies away from the the US course of action was seen by some economists as a necessary step to address the immediate economic concerns in the country, including the prices of equities as well as the soaring inflation rates.
"Policies similar to those adopted by China or India are more suitable and appropriate for the UAE, which enjoys similar economic conditions of robust growth, inflation worries and so forth," said Nazim Al Qudsi, chief investment officer at the National Bank of Abu Dhabi.
Abu Dhabi Securities Market's (ADSM) general index was also strongly hit. etisalat dropped 7.29 per cent to Dh21.60.
The real estate and energy sectors continued the sharp descent, with Aldar Properties tumbling 9.33 per cent to Dh9.52 and Sorouh Real Estate dropping 9.38 per cent to Dh7.34.
Dana Gas and Abu Dhabi National Energy (Taqa) plunged more than nine per cent each to close at Dh2.10 and Dh3.37, respectively. Panic selling was also fuelled by an announcement made by the Qatari finance minister that the GCC countries are seriously considering a collective revaluation of their currencies.
Optimism
Experts were optimistic that the downtrend will be short-lived given the strong fundamentals of the economy and the abundant domestic liquidity, which should be sufficient to stabilise the market.
"The withdrawal of foreign investors who liquidated their holdings in a collective manner has seriously affected the markets, and the bleak economic prospects of the US economy has taken a toll on all the global markets, developed and emerging alike," said Rami Sidani, senior associate partner at Shuaa Capital.
"But looking forward, there is enough liquidity in the region for the markets to rebound."
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