Dubai stocks eased yesterday after the announcement of a new initial public offering (IPO) by Deyaar, Dubai Islamic Bank's (DIB) new real estate arm.

The benchmark index fell 0.82 per cent to 3,872.16 as the Dubai Financial Market's (DFM) shares plummeted by 6.43 per cent to Dh2.91, while Emaar Properties lost 0.89 per cent to close at Dh11.15.

"When the decline is by more than six per cent, it does not indicate profit booking or speculation, the problem is that the pace of IPOs is not synchronised with the market's conditions," Nabil Fahat, managing director of Al Fajr Securities said.

The authorities should observe the low turnover of Air Arabia's IPO, and what is happening to the share price of Gulf Navigation before deciding on a new issue, according to Farhat. "Air Arabia's share price is by now less than its par value already. This should have been a lesson learned," he said.

None of the sub-indices recorded gains, while seven sectors out of a total of nine were in the red.



Lucrative opportunity

"DFM's problems do not arise from a poor performance for the listed companies, it is rather a consequence of irregular flow of liquidity," Farhat said, claiming that the central bank's aggressive lending, in addition to the excessive supply of IPOs are the responsible factors.

"Interest rates have climbed from 3.25 per cent to 5.25 per cent, presenting a very lucrative opportunity when compared to the bleak performance of equities," he elaborated.

In Abu Dhabi, the general index advanced slightly by 0.02 per cent to 3,091.01, as the decline of the index's heavy weights offset the strong gains recorded by other leading shares.

The rally on Aldar Properties and Gulf Cement continued, as the companies gained 3.21 and 9.88 per cent to close at Dh5.14 and Dh5.56 respectively.

However, the National Bank of Abu Dhabi and etisalat reversed course and fell by 2.25 and 1.18 per cent to close at Dh19.55 and Dh16.70 respectively, diminishing the gains of the general index. "In general, market conditions in Abu Dhabi are much healthier than Dubai, as the dividends almost doubled compared to last year, while the government is backing many of the listed companies," Farhat said.